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School of Arts and Sciences

Tufts Economist Brings Expertise to the Developing World

Tuesday, June 3, 2014

Economics Professor Margaret McMillan Works To Understand Economic Transformation in Sub-Saharan Africa

Professor McMillan

By Wan Jing Lee, A15

Margaret McMillanProfessor Margaret McMillan with farmers at a Ghanian pineapple farm that supplies fruit that is cut, packaged and shipped to supermarkets across Europe.

McMillan Professor McMillan gives her talk "Moving to Opportunity: Youth and Structural Change in Africa" at The Quest For Economic Transformation in Africa conference in Nairobi.

Girum Abebe Girum Abebe from the Ethiopian Development Research Institute challenges the panelists at The Quest For Economic Transformation in Africa conference.

Ousmane Badiane Ousmane Badiane (IFPRI Director for Africa), center and Professor Doug Gollins (Oxford), right, look on as Gyimah Brempong (IFPRI-Nigeria), left talks about Nigeria's experience with commercial rice at The Quest For Economic Transformation in Africa conference.

Associate Professor of Economics Margaret McMillan hopes to educate the world about the positive economic and political changes taking place across Africa. "Far too much is written about war, famine, poverty and corruption in Africa," says McMillan, "and people aren't aware that the quality of governance in Africa has improved dramatically over the past two decades or that poverty is falling rapidly."

McMillan's interest in Africa began in 1981 when she was a Peace Corps volunteer teaching high school math in Mali. "The people were so dynamic, welcoming and entrepreneurial. They dressed very well and had so much dignity," she said. "I couldn't understand why they were so poor."

She went on to complete her master's degree at Princeton University and returned to Tanzania to manage a $30 million loan from the World Bank designed to modernize agriculture. She then completed her Ph.D. in Economics at Columbia University in 1998.

Last December, with the aid of a grant from the Center for Economic and Policy Research (CEPR), McMillan began to investigate the impact of foreign investment on the development of Ethiopian manufacturing. Documenting and studying the interaction between domestic and foreign firms, says McMillan, is critical because the Ethiopian government aims to use foreign direct investment to upgrade skills in many sectors.

Huajian, a Chinese shoemaking firm that opened in Ethiopia in recent years, illustrates the interaction. The shoe manufacturer, says McMillan, hired and trained Ethiopians to use modern equipment and sent hundreds of workers to China for training. There is also evidence that the firm outsourced work to smaller shoemakers in the domestic market. "The leather industry is a top priority of the Ethiopian government because it has linkages to millions of poor farmers and can also employ thousands of workers in relatively high paid, stable manufacturing jobs," explains. McMillan.

"The more evidence that we can provide that foreign firms are making a difference with skill upgrading and employment, the better able the Ethiopian government will be to understand the firms' impact and explain to its people the benefits of the foreign investors," McMillan said. "It is a really exciting project, and we plan to conduct similar research in other countries such as Kenya, Tanzania, Nigeria and Ghana."

McMillan's research on foreign direct investment in Ethiopia complements her other research project: A $1.5 million grant from the United Kingdom's Economic and Social Research Council allows McMillan to research structural change and productivity growth in Africa and other developing countries. Constructing a long-term data set for 12 African countries, covering nine sectors from 1960s to 2000s, is at the center of the project.

The first project underscores the important role that manufacturing has played in driving structural change — to employ relatively large numbers of unskilled labor in a short period of time — while the second project examines the potential for foreign direct investment in manufacturing to stimulate industrial growth in Ethiopia.

McMillan is trying to understand the causes and consequences of structural transformation in Africa. "People understand that structural change is important to economic growth, but there is little consensus among researchers as to what actually drives this change. In the case of Africa, there has been almost no empirical work."

Children in rural environments tend to be much less educated than their urban counterparts, and research suggests that education and innovation in agriculture go together, says McMillan. "Education goes hand-in-hand with productivity increases, allowing people to move away from subsistence farming and towards market-oriented farming. As the process of modernization takes place, people increase their incomes," she explains.

Based on her recent findings, McMillan gave a talk on rural youth and structural change in Sub-Saharan Africa last December at The Quest For Economic Transformation in Africa. The African Center for Economic Transformation and the International Food Policy Research Institute (IFPRI), where McMillan is a senior research fellow, jointly organized the event. The two-day conference in Nairobi brought together experts on African economies from a variety of institutions including: Princeton, Oxford, the World Bank, the Overseas Development Institute and the Pan African Agribusiness and Agroindustry Consortium.

During the conference, McMillan emphasized that increased spending on rural education is part of a renewed commitment by African governments to reduce poverty. These days, the increasingly educated rural population has made it harder for their votes to be bought and she sees this as intricately linked with improvements in the quality of public service.

McMillan is also pleased that she's been able to engage African scholars and policymakers in her work. "After all, if what I am writing and saying doesn't resonate with the folks I am writing about, then it is probably wrong," says McMillan. From an intellectual perspective, Africa is an exciting place for me to work because so many modern sectors are under developed. This means that I can get in there before things change dramatically and try to understand through economic modeling and empirical work the nature of the changes."