Working Paper: CEPR ID: DP15810
Authors: Paul Castaneda Dower; Gunes Gokmen; Michel Le Breton; Shlomo Weber
Abstract: This paper examines the lasting impact of the alignment of African countries during the Cold War on modern economic development. We show that the division of the continent into two blocs (East/West) led to two clusters of development outcomes that reflect the Cold War’s ideological divide. To determine alignment, we introduce a non-cooperative game of social interactions between African countries, where every country chooses one of two existing blocs based on its predetermined bilateral similarities with other members of the bloc. We show the existence of a strong Nash equilibrium in our game and apply the celebrated MaxCut method to identify such a partition. We validate the alignment by confirming that it predicts UN General Assembly voting patterns during the Cold War. Our approach, linking global political interdependence to distinct development paths in Africa, extracts from history a micro-founded, exogenous treatment, while allowing for an endogenous, process-oriented view of historical events.
Keywords: cold war; political alliances; africa; blocs; development clusters; strong nash equilibrium; landscape theory
JEL Codes: C62; C72; F54; F55; N47; O19; O57; Y10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| alignment of African countries during the cold war (O55) | distinct development clusters (O29) |
| alignment of African countries during the cold war (O55) | higher levels of inequality and financial penetration (F65) |
| pseudowestern bloc countries (P20) | did not achieve higher income levels post-cold war (P19) |
| emergence of development clusters (O29) | characterized by economic inequality and market penetration (F61) |
| cold war (F51) | created development clusters in Africa (O55) |
| pseudowestern bloc countries (P20) | better education indicators (I24) |
| pseudowestern bloc countries (P20) | greater inequality (I24) |
| focal partition (F12) | outperformed random partitions in predicting development outcomes (I25) |