Working Paper
Development as Diffusion

We consider economic development of sub-Saharan Africa from the perspective of slow convergence of productivity, both across sectors and firms within sectors. Why have ‘productivity enclaves’, islands of high productivity in a sea of smaller low-productivity firms, not diffused more rapidly? We summarize and analyse three sets of factors: First, the poor business climate, which constraints the allocation of production factors between sectors and firms. Second, the complex political economy of business-government relations in Africa’s small economies, and third, the distribution of firm capabilities. The roots for these factors lie in sub-Saharan Africa’s geography and its distinctive history, including the legacy of its colonial period on state formation and market structure.