DP15810 Did the Cold War Produce Development Clusters in Africa?

Author(s): Paul Castaneda Dower, Gunes Gokmen, Michel Le Breton, Shlomo Weber
Publication Date: February 2021
Keyword(s): Africa, blocs, Cold War, Development Clusters, Landscape theory, Political Alliances, Strong Nash Equilibrium
JEL(s): C62, C72, F54, F55, N47, O19, O57, Y10
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=15810

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.