World Bank adjustment lending and economic performance in sub-Saharan Africa in the 1980s: a comparison of early adjusters, late adjusters, and nonadjusters

Abstract

Using a methodology that allows for endogenizing decisions to participate in World Bank adjustment lending programs, and for testing the validity of assumptions about program participation, the author studies the effectiveness of these programs in sub - Saharan Africa. He shows that adjustment programs in sub - Saharan Africa had no statistically significant effect on growth in the second half of the 1980s, compared with the first half, but they have had a significant and deleterious effect on investment. Adjustment lending has significantly improved export performance in sub - Saharan Africa, at least compared with nonadjusting African countries. The perceived increases in export competitiveness and in the efficiency of investment (supposed to be generated by reform programs) has not been sufficient to counterbalance the ensuing decline in investment and hence to restore economic growth in sub - Saharan Africa. These findings must be qualified: the methodology for classifying countries as adjusting or nonadjusting does not allow for different degrees of implementation - so, strictly speaking, the findings reflect an assessment of the effectiveness of a proxy (adjustment lending) for the adjustment programs.

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