nep-afr New Economics Papers
on Africa
Issue of 2005‒01‒16
eight papers chosen by
Suzanne McCoskey
US Naval Academy

  1. All the Conditions of Effective Foreign Aid By D.S. Prasada Rao; Derek D. Headey; Alan Duhs
  2. Productivity Growth and Poverty Reduction in Developing Countries By Centre for the Study of Living Standards
  3. Parental Education and Children’s Schooling Outcomes: Is the Effect Nature, Nurture, or Both? Evidence from Recomposed Families in Rwanda By Damien de Walque
  4. Environmental Factors and Children’s Malnutrition in Ethiopia By Patricia Silva
  5. Roads Out of Poverty? Assessing the Links between Aid, Public Investment, Growth, and Poverty Reduction By Pierre-Richard Agénor; Nihal Bayraktar; Karim El Aynaoui
  6. How Fair is Workfare? Gender, Public Works, and Employment in Rural Ethiopia By Agnes R. Quisumbing; Yisehac Yohannes
  7. Future Challenges to NGOs and Development Workers By Rana Riaz Saeed
  8. An Assignment Theory of Foreign Direct Investment By Volker Nocke; Stephen Yeaple

  1. By: D.S. Prasada Rao; Derek D. Headey; Alan Duhs (CEPA - School of Economics, The University of Queensland)
    Abstract: The conclusion that foreign aid will promote economic growth only when allocated towards good policy regimes has been the subject of considerable debate. Aid effectiveness researchers have variously sought to falsify this result or to find other individual conditions of aid effectiveness. However, economic theory suggests that any factor which influences the expected returns to investment may influence the effect of aid on growth even when aid is partly diverted to consumption. To investigate this hypothesis, “all” of the hypothesized conditions of aid effectiveness are individually tested in a cross-country growth specification. From these tests the most significant and robust individual interactions are simultaneously modeled, thereby deriving multiple conditions of aid effectiveness. The paper concludes that aid is more effective in economies experiencing economic shocks or recovering from war, and less effective in countries which are geographically disadvantaged or at war. We also find a previously unidentified condition of aid ineffectiveness: the inflow of foreign direct investment. This finding renews a justified interest in the policy-aid-growth nexus, insofar as domestic policy determines the distribution of aid and FDI flow, which appear to act as substitutes in the growth process.
    Date: 2004–08
  2. By: Centre for the Study of Living Standards
    Abstract: The United Nations has set as a goal for the world community the halving of the rate of poverty between 1990 and 2015. Previous literature and empirical work provides a strong consensus that growth reduces poverty, and several recent studies have also found that the higher is income inequality within a country the more limited is the impact of growth on reducing poverty. But in dynamic economies most economic growth comes from productivity growth, and few studies have tested the relationships between productivity growth, poverty and inequality. The present study uses several sources of international data on labour productivity, poverty and income inequality, and finds that across the developing countries for which data are available productivity growth plays a substantial role in reducing poverty. This effect is also found to be stronger in countries with relatively low income inequality. Furthermore, productivity growth is found to account for changes in poverty better than the more commonly used economic growth. This conclusion suggests that developing countries, in attempting to reach their poverty reduction objectives, should pursue policies that foster productivity growth. However, a strong social safety net is also required to ensure that the adjustment costs that come with productivity increases do not fall disproportionately on the poor and that all members of society realize the gains from growth.
    Keywords: Productivity, Poverty, Inequality, Productivity Growth, Social Security System, Social Policy, Reform, Economic Reform, Urban, Rural, Developing Countries, Development, Growth, Millenium Development Goals
    JEL: O47 O10 P17 I32 D31
    Date: 2003–09
  3. By: Damien de Walque (World Bank)
    Abstract: Educated parents tend to have educated children. But is intergenerational transmission of human capital more nature, more nurture, or both? De Walque uses household survey data from Rwanda that contains a large proportion of children living in households without their biological parents. The data allows him to separate genetic from environmental parental influences. The nonrandom placement of children is controlled by including the educational attainment of the absent biological parents and the type of relationship that links the children to their “adoptive” families. The results of the analysis suggest that the nurture component of the intergenerational transmission of human capital is important for both parents, contrary to recent evidence proposed by Behrman and Rosenzweig (2002) and Plug (2004). The author concludes that mothers’ education had no environmental impact on children’s schooling. Interestingly, mothers’ education matters more for girls, while fathers’ education is more important for boys. Finally, an important policy recommendation in the African context emerges from the analysis: the risk for orphans or abandoned children to lose ground in their schooling achievements is minimized if they are placed with relatives. This paper—a product of the Public Services Team, Development Research Group—is part of a larger effort in the group to understand the determinants of education and its intergenerational transmission.
    Keywords: Education
    Date: 2005–01–10
  4. By: Patricia Silva
    Abstract: Ethiopia has one of the highest child malnutrition rates in the world. A considerable effort to monitor child malnutrition rates over the past two decades shows that, despite some improvements, approximately half of the children under five are still malnourished. Much of the burden of deaths resulting from malnutrition, estimated to be over half of childhood deaths in developing countries, can be attributed to mild or moderate malnutrition. Several biological and social economic factors contribute to malnutrition. Using the 2000 Ethiopia Demographic and Health Survey data, Silva examines the impact of access to basic environmental services, such as water and sanitation, on the probability children are stunted and underweight. She focuses on the impact of externalities associated with access to these services. The author finds that biological factors (such as child’s age and mother’s height) and social economic factors (such as household wealth and mother’s education) are important determinants of a child’s nutritional status. This is consistent with the findings of most studies in the literature. With respect to the environmental factors, the author finds that there are indeed significant externalities associated with access to water and sanitation at the community level. The external impacts at the community level of access to these services are an important determinant of the probability a child is underweight. The results also show that the external impact of access to water is larger for children living in rural areas. This paper—a product of the Environment Department—is part of a larger effort in the department to understand the linkages between poverty and the environment.
    Keywords: Environment; Health & Population; Rural Development
    Date: 2005–01–12
  5. By: Pierre-Richard Agénor; Nihal Bayraktar; Karim El Aynaoui
    Abstract: Agénor, Bayraktar, and El Aynaoui develop a macroeconomic framework that captures links between aid, public investment, growth, and poverty. Public investment is disaggregated into education, infrastructure, and health, and affects both aggregate supply and demand. Dutch disease effects are captured by accounting for changes in the relative price of domestic goods. The authors assess the impact of policy shocks on poverty by linking the model to a household survey. They calibrate the model for Ethiopia and simulate the changes in the allocation of aid and public investment. The authors also calculate the amount by which foreign aid should increase to reach the poverty targets of the Millennium Development Goals. This paper—a product of Poverty Reduction and Economic Management 2, Africa Technical Families—is part of a larger effort in the region to formulate country-specific growth strategies.
    Keywords: Macroecon & Growth
    Date: 2005–01–12
  6. By: Agnes R. Quisumbing; Yisehac Yohannes (International Food Policy Research Institute)
    Abstract: Quisumbing and Yohannes use the Ethiopian Rural Household Survey to examine the gender dimensions of public works. They use three rounds of a panel conducted in 1994–95 to explore the determinants of participation in, days worked, wages, and earnings from wage labor, food-for-work (FFW), and self-employment. Then they analyze public works data collected in 1997, together with program data collected in 2003. FFW operates in a similar fashion with other labor markets in Ethiopia where female participation is low. Gender differences are important in the participation decision, but operate differently in different types of labor markets. Better-educated women are more likely to participate in the wage labor market, while higher livestock holdings diminish participation more for women. Females with more schooling are also more likely to participate in FFW. Men’s and women’s participation in FFW and self-employment responds differently to household and community shocks. After controlling for selection in which gender plays an important role, gender disadvantages in the wage labor market and FFW are insignificant. Returns to schooling and height are consistently positive in both wage labor and FFW, suggesting returns to human capital investment, even in the low-skill labor markets of rural Ethiopia. Program characteristics significantly affect participation, with differential effects on men and women. Participation, days worked, wages, and earnings vary according to the type of project. Relative to infrastructure projects, water, social services, and other projects decrease participation probabilities. Distance has a strong negative effect on women’s participation relative to men’s. This paper—a product of the Gender Division, Poverty Reduction and Economic Management Network—is part of a larger effort in the network to integrate gender issues into economic policy.
    Keywords: Labor & Employment; Poverty; Rural Development; Social Development
    Date: 2005–01–13
  7. By: Rana Riaz Saeed (Development Advocates & Lobbyists)
    JEL: O P
    Date: 2005–01–11
  8. By: Volker Nocke (Department of Economics, University of Pennsylvania); Stephen Yeaple (Department of Economics, University of Pennsylvania)
    Abstract: We develop an assignment theory to analyze the volume and composition of foreign direct investment (FDI). Firms conduct FDI by either engaging in greenfield investment or in cross-border acquisitions. Cross-border acquisitions involve firms trading heterogeneous corporate assets to exploit complementarities, while greenfield FDI involves building a new plant in the foreign market. In equilibrium, greenfield FDI and cross-border acquisitions co-exist, but the composition of FDI between these modes varies with firm and country characteristics. Firms engaging in greenfield investment are systematically more efficient than those engaging in cross-border acquisitions. Furthermore, most FDI takes the form of cross-border acquisitions when factor price differences between countries are small, while greenfield investment plays a more important role for FDI from high-wage into low-wage countries. These results capture important features of the data.
    Keywords: Foreign Direct Investment, Mergers, Greenfield, Firm Heterogeneity
    JEL: F12 F14 F23 L11
    Date: 2004–12–07

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