On omitted heterogeneity and lack of growth in sub-Saharan Africa

Abstract

There is hardly any bigger economic tragedy than poor economic development of sub-Saharan Africa. The persistent character of its slow growth or even decline is not possible to explain when using standard growth theories and cross-coutry data. We have suggested a classification framework for existing theories and it allowed us to show that all these approaches (despite their broadness and different policy implications) assume that people's preferences everywhere in the world can be embodied in Homo oeconomicus concept. Growth incompatible behavior is then explained by unfavorable environment being it geography, colonial legacy or bad policy environment. Our aim is to highlight that current concepts omit the possible heterogeneity of people resulting from very poor education level, cultural differences and health conditions. In our view, explanation of African specific behavioral patterns can contribute to deeper understanding, why there is lack of investments and lack of specialization; and why economic growth has been largely missing in sub-Saharan Africa.