This is a new area of work, which aims to identify the binding constraint to growth. We build on our previous work on growth for the Commission for Africa, where we advised the Commission for Africa with a number of case studies on growth and investment in sub-Saharan Africa. The papers created by the Programme were used intensively in the preparation and final version of the CfA report.
There are a variety of tools to understanding the most binding constraints to economic growth in an economy. These include:
- subjective ways of understanding the binding constraints (rankings of long lists of constraints in enterprise surveys; or asking existing actors involved in state-business relations);
- more systematic empirical / statistical approaches (growth diagnostics, cost/benefit analyses)
- theoretically based approaches (e.g. moving from low productivity to high productivity activities, innovation and “endogenous” growth in the long-run depend on good quality education, infrastructure investment, entrepreneurship etc, whatever the short-run constraints may have been).
Binding constraints have different meanings for different groups, time periods and dimensions of growth. Constraints also depend on each other, not just consecutively, for instance when solving co-ordination failures. We need to address the various gaps in existing growth diagnostics, such as the role of policy options, political incentives, as well as uncertainties such as the relationship with trade diagnostics.
