This document summarizes the results of an empirical analysis comparing export diversification and economic convergence in the Economic Community of West African States (ECOWAS) and Southern African Development Community (SADC). The analysis finds: 1) In both regions, increasing export diversification is associated with reducing income gaps to the global frontier, and vice versa. 2) Macroeconomic stability, openness to trade, and stronger political and economic freedoms are linked to greater diversification and convergence. 3) Within ECOWAS, Cape Verde has achieved higher levels of diversification and a smaller income gap compared to the regional average, while Mozambique trails the SADC average on these measures.

1. Cape Verde and Mozambique as Development Successes in Sub-Saharan Africa Jorge Braga de Macedo & Luís Brites Pereira NBER Conference on African Development Successes Cambridge, Massachusetts, December 11-12, 2009

7. Mutual Knowledge among Community of Portuguese-speaking Countries (CPLP) Ten years after creating CPLP in Lisbon, the 2006 summit approved in Bissau a declaration on MDGs emphasizing mutual knowledge : could standards of appropriateness regarding institutional reform be more responsive to historical affinities than to geography ?

8. EU, PALOP, CPLP cooperation The five Portuguese-speaking African countries (CPV, MOZ, Angola, Guinea-Bissau, Sao Tome e Principe) formed a group known as PALOP in 1979. PALOP held ten summits until 1992, when the first Regional Indicative Programme with the EU was signed . A Memorandum of Understanding with the European Commission was signed on the eve of the 2007 Europe-Africa summit in Lisbon, extended to CPLP .

9. Why Cape Verde & Mozambique? Geography - Cape Verde is a small island state with little natural resources and a difficult climate. History - Mozambique fought a protracted civil war following its independence from Portugal in the mid 1970s. Widespread recognition that both countries are actively seeking to overcome adverse developmental conditions due to:

10. Relative sizes in 2003 (Maddison database)

11. Cape Verde and ECOWAS - YCAP 1990GK$

12. Mozambique and SADC – YCAP 1990 GK$

14. 2. Number equivalent 5 digit Herfindahl Index (% p.a.)

15. PALOP vs SSA – YCAP 1990 GK K$

18. Conditional mean EMP

19. Conditional mean EMP

20. Conditional EMP Volatility

21. Conditional EMP Volatility

22. 3. World Bank Governance Indicators (1996-2007)

25. 7. International Trade (=5, best / worst )

26. 8. Infrastructure (=5, best / worst )

27. 9. Finance, Competition, Education ( best / worst )

28. 10. Institutions - stability, corruption, rule of law ( best / worst )

29. 11. Quality of regulation ( best / worst )

32. Globalization, Freedoms and Convergence: a summary of three way interactions Source: Macedo, Oliveira-Martins, Pereira (2007a)

36. ECOWAS: Relation between Income Gap & Number Equivalent

37. ECOWAS country means: Income Gap & Number Equivalent

38. SADC: Relation between Income Gap & Number Equivalent

39. SADC country means: Income Gap & Number Equivalent

40. ECOWAS, Cape Verde: Income Gap & Government Deficit – Country Means

41. ECOWAS Income Gap & Government Deficit – Time Means

42. SADC, Mozambique: Income Gap & Government Deficit – Country Means

43. SADC: Income Gap & Government Deficit – Time Means

44. ECOWAS, Cape Verde: Freedoms

45. SADC, Mozambique: Freedoms

46. ECOWAS: GDP per capita and Real Effective Exchange Rate (% p.a.)

47. SADC : GDP per capita and Real Effective Exchange Rate (% p.a.)

50. ECOWAS vs SADC – High Regime ECOWAS SADC ygap ↓ -> neq5 ↑ neq5 ↑ -> ygap ↓ ygap ↓ -> neq5 ↑ neq5 ↑ -> ygap ↓ open ↑ -> ygap ↓ govdef ↑ -> neq5 ↓ open ↑ -> neq5 ↓ govdef ↑ -> neq5 ↑ prcl ↑ -> neq5 ↑ ef ↑ -> neq5 ↑ prcl ↑ -> ygap ↓ ef ↑ -> ygap ↓ prcl ↑ -> neq5 ↓ ef ↑ -> neq5 ↓ legaleng -> ygap ↓

51. ECOWAS vs SADC – Full Sample ECOWAS SADC ygap ↓ -> neq5 ↑ neq5↑ -> ygap ↑ ygap ↓ -> neq5 ↑ neq5 ↑ -> ygap ↓ inflation ↑ -> ygap ↓ govdef ↑ -> ygap ↓ govdef ↑ -> neq5 ↓ open ↑ -> neq5 ↓ prcl ↑ -> ygap ↓ ef ↑ -> ygap ↓ ef ↑ -> neq5 ↑ prcl ↑ -> ygap ↓ ef ↑ -> ygap ↑ prcl ↑ -> neq5 ↓ ef ↑ -> neq5 ↑ cpv -> ygap ↓ sen -> ygap ↓ cpv -> neq5 ↑ sen -> neq5 ↓ legaleng -> ygap ↓ mus -> ygap ↓ moz -> ygap ↓ moz -> neq5 ↓ legaleng -> neq5 ↓

52. ECOWAS – Summary of Results LOW FULL HIGH ygap ↓ -> neq5 ↑ ygap ↓ -> neq5 ↑ neq5↑ -> ygap ↑ ygap ↓ -> neq5 ↑ neq5 ↑ -> ygap ↓ inflation ↑ -> ygap ↓ inflation ↑ -> neq5 ↑ govdef ↑ -> neq5 ↑ Less macroeconomic stability? inflation ↑ -> ygap ↓ open ↑ -> ygap ↓ govdef ↑ -> neq5 ↓ open ↑ -> neq5 ↓ demage ↑ -> ygap ↓ ef ↑ -> neq5 ↑ dictrans ↑ -> neq5 ↓ prcl ↑ -> ygap ↓ ef ↑ -> ygap ↓ demage ↑ -> ygap ↓ demtot ↑ -> ygap ↑ ef ↑ -> neq5 ↑ demage ↑ -> neq5 ↓ prcl ↑ -> neq5 ↑ ef ↑ -> neq5 ↑ cpv -> ygap ↓ sen -> ygap ↓ legaleng -> ygap ↓ cpv -> neq5 ↑ sen -> neq5 ↓ legaleng -> ygap ↓

53. ECOWAS 3SLS Results

54. ECOWAS 3SLS Results contd

55. SADC – Summary of Results SADC LOW FULL HIGH ygap ↑ -> neq5 ↑ neq5↑ -> ygap ↑ ygap ↓ -> neq5 ↑ neq5 ↑ -> ygap ↓ ygap ↓ -> neq5 ↑ neq5 ↑ -> ygap ↓ inflation ↑ -> ygap ↑ open ↑ -> ygap ↑ inflation ↑ -> neq5 ↓ open ↑ -> neq5 ↓ govdef ↑ -> ygap ↓ govdef ↑ -> neq5 ↓ open ↑ -> neq5 ↓ govdef ↑ -> neq5 ↑ prcl ↑ -> ygap ↓ ef ↑ -> ygap ↓ demage ↑ -> ygap ↑ demtot ↑ -> ygap ↑ prcl ↑ -> neq5 ↑ ef ↑ -> neq5 ↑ demage ↑ -> neq5 ↓ demtot ↑ -> neq5 ↓ ef ↑ -> neq5 ↑ dictrans ↑ -> neq5 ↓ prcl ↑ -> ygap ↓ ef ↑ -> ygap ↑ demtot ↑ -> ygap ↑ prcl ↑ -> neq5 ↓ ef ↑ -> neq5 ↑ demage ↑ -> neq5 ↓ constage ↑ -> neq5 ↑ prcl ↑ -> ygap ↓ ef ↑ -> ygap ↓ prcl ↑ -> neq5 ↓ ef ↑ -> neq5 ↓ mus -> ygap ↓ moz -> ygap ↓ moz -> neq5 ↓ legaleng -> neq5 ↓

56. SADC 3SLS Results

57. SADC 3SLS Results contd

58. ECOWAS, Cape Verde: Income Gap & Gvt. Deficit – Regimes, Country Means

59. ECOWAS, Cape Verde: Income Gap & Inflation – Regimes, Country Means

60. ECOWAS: Income Gap & Openness – Regimes, Country Means

61. ECOWAS Economic vs Political Freedom across Regimes

62. SADC Economic vs Political Freedom across regimes

63. Freedoms: 2SLS Results ECOWAS SADC ygap neq5 ygap neq5 Between Effects EF PRCL EF Fixed Effects EF EF PRCL EF EF

64. Cape Verde, Mozambique Results Full sample: t-statistics in parentheses *** p<0.01, ** p<0.05, * p<0.1 ygap neq5 Cape Verde -0.299*** (-3.267) 0.438** (2.346) Senegal -0.370*** (-6.040) 0.504** (4.982) Mauritius -0.833*** (-5.429) Mozambique -0.728*** (-4.403) -1.313*** (-4.507)

65. Cape Verde vs ECOWAS: Income Gap

66. Cape Verde vs ECOWAS: NEQ

67. Cape Verde - Income Gap & NEQ

68. Mozambique vs SADC: Income Gap

69. Mozambique vs SADC: NEQ

70. Mozambique: Income Gap & NEQ

73. Thank you for your attention.