Journal of Economics and Development Studies

External versus Domestic Financing of Development in African Countries
Amen T.P. Dovoedo

Abstract
This paper presents across-section quantitative assessment of African countries development and it’s financing. The first part of our investigation consists in computing a development index that summarizes six development indicators for the selected countries in a reference year (1991), relying on a Principal Component Analysis. The second part of the paper specifies and estimates a “development equation” which relates the development index computed in the first part, to variables reflecting foreign and domestic financing of development on one hand, and on the second hand, the tertiary sector importance in the economy, supposed to measure the weight of private entrepreneurship in the selected countries. Domestic saving appeared as the first determining factor of development, followed by foreign aid. The well-known fact that debt, on the contrary, has a negative impact on African countries’ development and is a real burden for them is also confirmed by our estimation. Moreover, it appears that the reduction of the debt burden by a given percentage procures more gain in term of development than the increase by the same percentage of domestic saving or foreign aid. As for the impact of ‘private entrepreneurship’, it seems to have no significant contribution to ‘development’, which reflects the lack of appropriate incentives in favor of the private sector.

Full Text: PDF     DOI: 10.15640/jeds.v3n3a12