Services and Economic Development in Africa

Services account for 53% of value added and 34% of total formal employment in Sub-Saharan Africa. Due to the changes occurring in the organisation of international production, the reduction in transport costs and opportunities offered by new technologies, the economic role of services is changing dramatically. Many services activities increasingly are tradable, have experienced high productivity growth, and can achieve economies of scale. In spite of this, research on the role of services in developing countries is scant. This gap in the literature is particularly surprising in a global context in which traditional manufacturing is losing ground as a driver of economic growth in developing countries.

This project centers on an empirical assessment of the relationship between the distribution of employment across services industries and key indicators of economic development in Africa. The research involves the construction of a comprehensive database mapping the sectoral distribution of services employment at the sub-national level across a wide number of African countries and over time. The objective is to generate stylised facts on the relationship between employment in services sectors and key indicators of economic development at the sub-national level in Africa.  

We expect our descriptive analysis to contribute to advance the theoretical understanding of the anatomy and potential of services led-development. From a policy perspective, this project will contribute to the long-standing debate on the extent and direction of structural transformation for developing countries. More specifically, this project is relevant to understand whether and how service-led development can be a suitable strategy for African countries by documenting changes in the sectoral distribution of employment at the sub-national level, helping to assess whether a structural transformation away from agriculture and manufacturing towards services is a feasible path to economic growth.

Team: Leonardo Baccini, Matteo Fiorini, Bernard Hoekman, Marco Sanfilippo,