Revisiting Thirlwall’s law in African countries: assessing the scope for structural change and implications for long-term growth

Purpose This paper fits both the simple and multi-sectoral versions of the balance-of-payments-constrained (BPC) growth model to assess the scope for structural change and implications for long-term growth in African countries. Design/methodology/approach The paper uses data on technology- and resource-based trade from 1980 to 2017 for two African countries – Morocco and Tunisia. Long-term growth in both countries can be reliably predicted using either the simple or multi-sectoral BPC growth model. By comparing sectoral income elasticities of demand for exports and imports, the multi-sectoral version of the BPC growth model provides insight into which sectors contribute the most to long-term growth in each country. Findings This finding provides evidence on where resources should be concentrated to raise their long-term growth – insights that the simple version does not provide because it relies on aggregate trade data. The paper concludes by discussing the implications of the findings in relation to the scope for structural change in Morocco and Tunisia. Practical implications Policymakers can identify sectors that have higher income elasticity of demand for exports in sampled countries and formulate industrial policies to accelerate long-term growth. Originality/value This paper adopts technology- and resource-based trade data to estimate both models to assess the scope of structural change. This data is scarce for most African economies, yet it is important to understand the extent to which African countries are using technology-intensive manufacturing and trade to promote structural transformation. Thus, to the best of our knowledge, this paper is the first to use this kind of data to estimate such models for African countries.