Determinants of Total Factor Productivity Growth in Sub-Saharan African Countries

While Sub-Saharan African countries are resolved to achieve sustainable economic development, their productivity remains low. In such economies where R&D is low, productivity and technological development is dependent on the emulation of technology from the highly innovating countries. The ability to emulate technology is determined by the robustness of contact and absorptive capacities. Using a fixed-effects model this paper finds two outstanding results. First, growth in Total Factor Productivity (TFP) is consistently positively dependent on improvement in economic freedom and institutions. Second, foreign direct investment is a positive contributor to TFP but uniquely where human capital is high, in democracies, and interestingly among non-oil exporting countries. The results also show that the effects of other contact variables like trade and aid on TFP growth depend on the unique characteristics of countries like income levels, geography, economic and political institutions.