Growth decomposition and analysis: a comparative study of mauritius and senegal

Abstract

Despite their similar historical backgrounds, Mauritius and Senegal have had very divergent growth patterns. This paper analyzes these countries’ aggregate and sectoral economies to present some evidence on the different dynamics that led their growth paths to diverge. My main contribution in this paper is collecting and constructing historical harmonized national accounts data series for both countries from 1980 to 2019. I use the data to conduct aggregate and sectoral decompositions of the economies to evaluate the contribution of each factor and sector toward their aggregate growth. I find two key results: i) The countries diverged in the 1980s and 1990s mostly because of within-sector productivity growth, with little labor reallocation effect, and Senegal has been catching up through labor reallocation productivity gains since the 2000s. ii) In Mauritius, the services sector contributed most to its fast TFP growth, while in Senegal, the agricultural sector mitigated its overall TFP decline in the 2000s. These results suggest that i) the policies enacted by these two countries in the 1980s constitute the main critical junctures that set their development paths apart and ii) the countries’ potential for growth lies in within-sector productivity growth, as there are few productivity gains to be drawn from sectoral reallocation of labor.