Growth Accounting in ECOWAS Countries: A Panel Cointegration Approach


Prof. Mohamed Ben Omar Ndiaye

and

Dr. Robert Dauda Korsu

ABSTRACT

Long term economic growth is necessary for poverty reduction and it can be enhanced through factor accumulation and increasing the productivity of factors of production. There have been various policy efforts to strengthen economic growth in not only the ECOWAS region but also other developing economies, though economic growth remains a challenge in the ECOWAS region.

The paper investigates the sources of long run economic growth in the ECOWAS region with a view to unearthing whether growth of the region during the period 1980 to 2012 was driven more by factor accumulation or growth of total factor productivity. The methodology involves the estimation of a production function with capital stock and labour as inputs while real GDP is the output, over the period 1980 to 2012 for fourteen of the fifteen ECOWAS countries. Panel unit root and cointegration tests with various techniques including the Levin-Lin-Chu and Im-Pesaran-Shim test for unit root and the Pedroni test for cointegration are carried out. The share of capital and labour in production are then estimated. The growth accounting technique is applied to the estimated coefficients of capital and labour. The results show that during the period 1980 to 2012, with the exception of Nigeria productivity growth was not the hardcore of the growth observed in the ECOWAS countries but the growth was driven more by the contribution of either capital accumulation or labour growth. In addition,  the contribution of labour to growth increased in all the countries, the contribution of capital declined in Cote d'voire and Nigeria and that of total factor productivity declined in Ghana, Guinea, Niger, Senegal and Togo but  they increased in the other countries.

The policy implication of this result is that in order to enhance long run economic growth in ECOWAS countries there is need to exert more efforts at raising productivity of factors of production. This requires more efforts at building human capacity for labour to be more effective and more investment in infrastructure, especially energy, in order to make capital more productive.


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