Social Capability and Resilience to Economic Shrinking - An innovative Perspective on Growth and the Income Divergence between Sub-Saharan Africa and East Asia & Pacific

Abstract: Since the beginning of the 1960’s, there has been a widening gap in GDP per capita between the countries in the regions of East Asia & Pacific and Sub-Saharan Africa. By growing more and shrinking less, some but not all, developing countries have deviated from a state of underdevelopment and caught up with the developed world. Moreover, it has been argued that the biggest chance of catching up is found in countries that are technologically backwards, but socially advanced. Accordingly, this paper emphasizes institutions and uses a framework of five social capabilities; transformation, inclusion, social stability, state autonomy and accountability, to investigate the relationship between social capability, economic growth and economic shrinkage. Social capabilities showed to be significant contributors to GDP, but the returns of improvements were higher in East Asia & Pacific compared to Sub-Saharan Africa. Whether and how social capabilities helped build resilience to economic shrinking remains ambiguous. The study does however encourage further research on economic shrinking as it clearly has growth and development effects.