nep-afr New Economics Papers
on Africa
Issue of 2005‒06‒14
eleven papers chosen by
Suzanne McCoskey
US Naval Academy

  1. Growth and Epidemic Diseases By Bell, Clive; Gersbach, Hans
  2. Monetary Policies for Developing Countries: The Role of Institutional Quality By Huang, Haizhou; Wei, Shang-Jin
  3. The Foreign Service and Foreign Trade: Embassies as Export Promotion By Rose, Andrew K
  4. Trade Preferences to Small Developing Countries and the Welfare Costs of Lost Multilateral Liberalization By Limão, Nuno; Olarreaga, Marcelo
  5. Would Multilateral Trade Reform Benefit Sub-Saharan Africans? By Anderson, Kym; Martin, Will; van der Mensbrugghe, Dominique
  6. Economic Transition and Growth By Peter C.B. Phillips; Donggyu Sul
  7. A Statistical Model for Simple, Fast and Reliable Measurement of Poverty By Astrid Mathiassen
  8. The barrier model of productivity growth: South Africa By Torfinn Harding and Jørn Rattsø
  9. Una descripción general del crecimiento económico en el África Subsahariana By Juan Carlos Pérez Mesa; Jaime de Pablo Valenciano
  10. The Economic Costs of Corruption: A Survey and New Evidence By Axel Dreher; Thomas Herzfeld
  11. Shadow Economies of 145 Countries all over the World: What Do We Really Know? By Friedrich Schneider

  1. By: Bell, Clive; Gersbach, Hans
    Abstract: We study the formation of human capital and its transmission across generations when a society is assailed by an epidemic disease such as AIDS. We establish that the disease can severely retard economic growth, even to the point of leading to an economic collapse. We also show that the epidemic may exacerbate inequality. Pooling health risks in the society puts the society on a ‘make and break’ road.
    Keywords: AIDS; epidemic diseases; growth; human capital; pooling risks
    JEL: E13 I12 I21 O41
    Date: 2004–12
  2. By: Huang, Haizhou; Wei, Shang-Jin
    Abstract: Weak public institutions, including high levels of corruption, characterize many developing countries. With a simple model, we demonstrate that institutional quality has important implications for the design of monetary policies and can produce several departures from the conventional wisdom. We find that a pegged exchange rate or dollarization, while sometimes prescribed as a solution to the problem of a lack of credibility, is typically not appropriate in developing countries with poor institutions. Such an arrangement is inferior to an optimal inflation targeting, or a Rogoff-style central banker, whose optimal degree of conservatism is proportional to the quality of institutions. Furthermore, our results cast doubt on the notion that a low inflationary target or a currency board can be used as an instrument to induce governments to strengthen quality of public institutions.
    Keywords: conservative central banker; corruption; currency board; dollarization; inflation targeting; institutional quality; monetary policy
    JEL: E52 E58 E61 E62 H50
    Date: 2005–02
  3. By: Rose, Andrew K
    Abstract: As communication costs fall, foreign embassies and consulates have lost much of their role in decision-making and information-gathering. Accordingly, foreign services are increasingly marketing themselves as agents of export promotion. I investigate whether exports are in fact systematically associated with diplomatic representation abroad. I use a recent cross-section of data covering 22 large exporters and 200 import destinations. Bilateral exports rise by approximately 6-10% for each additional consulate abroad, controlling for a host of other features including reverse causality. The effect varies by exporter, and is non-linear; consulates have smaller effects than the creation of an embassy.
    Keywords: consulate; country; data; destination; empirical; gravity; import; international; panel
    JEL: F13
    Date: 2005–03
  4. By: Limão, Nuno; Olarreaga, Marcelo
    Abstract: The proliferation of preferential trade liberalization over the last 20 years has raised the question of whether it slows down multilateral trade liberalization. Recent theoretical and empirical evidence indicates this is the case even for unilateral preferences that developed countries provide to small and poor countries but there is no estimate of the resulting welfare costs. To avoid this stumbling block effect we suggest replacing unilateral preferences by a fixed import subsidy. We argue that this scheme would reduce the drag of preferences on multilateral liberalization and generate a Pareto improvement. More importantly, we provide the first estimates of the welfare cost of preferential liberalization as a stumbling block to multilateral liberalization. By combining recent estimates of the stumbling block effect of preferences with data for 170 countries and over 5,000 products we calculate the welfare effects of the United States, European Union and Japan switching from unilateral preferences to Least Developed Countries to the import subsidy scheme. Even in a model with no dynamic gains to trade we find that the switch produces an annual net welfare gain for the 170 countries ($4,354 million) and for each group: the United States, European Union and Japan ($2,934 million), Least Developed Countries ($520 million) and the rest of the world ($900 million).
    Keywords: MFN tariff concessions; multilateral trade negotiations; preference erosion; preferential trade agreements
    JEL: D78 F13 F14 F15
    Date: 2005–05
  5. By: Anderson, Kym; Martin, Will; van der Mensbrugghe, Dominique
    Abstract: This paper examines whether, in the presence of trade preferences, Sub-Saharan African economies, and especially its poorest households, could gain from multilateral trade reform. The World Bank’s LINKAGE model of the global economy is employed to examine the impact first of current trade barriers and agricultural subsidies, and then of possible outcomes from the WTO’s Doha round. The results suggest moving to free global merchandise trade would boost real incomes in sub-Saharan Africa proportionately more than in other developing countries or in high-income countries, despite a terms of trade loss in parts of the region. Farm employment and output, the real value of agricultural and food exports, the real returns to farm land and unskilled labor, and real net farm incomes would all rise in the region, thereby alleviating poverty. A Doha partial liberalization of both agricultural and no-agricultural trade could take the region some way towards those desirable outcomes, but more so the more both rich and poor countries reduce their applied tariffs.
    Keywords: computable general equilibrium; multilateral negotiationa; sub-Saharan Africa; trade policy; WTO
    JEL: C68 D58 F13 F17 O55 Q17
    Date: 2005–05
  6. By: Peter C.B. Phillips (Cowles Foundation, Yale University); Donggyu Sul (Dept. of Economics, University of Auckland)
    Abstract: Some extensions of neoclassical growth models are discussed that allow for cross section heterogeneity among economies and evolution in rates of technological progress over time. The models offer a spectrum of transitional behavior among economies that includes convergence to a common steady state path as well as various forms of transitional divergence and convergence. Mechanisms for modeling such transitions and measuring them econometrically are developed in the paper. A new regression test of convergence is proposed, its asymptotic properties are derived and some simulations of its finite sample properties are reported. Transition curves for individual economies and subgroups of economies are estimated in a series of empirical applications of the methods to regional US data, OECD data and Penn World Table data.
    Keywords: Economic growth, Growth convergence, Heterogeneity, Neoclassical growth, Relative transition, Transition curve, Transitional divergence
    JEL: O30 O40 C33
    Date: 2005–06
  7. By: Astrid Mathiassen (Statistics Norway)
    Abstract: The primus inter pares of the UN Millennium Development Goals is to reduce poverty. The only internationally accepted method of estimating poverty requires a measurement of total consumption based on a time and resource demanding household budget or integrated survey over 12 months. Rather than measuring poverty only, say every 5th year, a model is presented to predict poverty based upon a small set of household variables to be collected yearly between two 12 months household surveys. Information obtained from the light surveys may then be used to predict poverty rates. The key question is whether the inaccuracy in these predictions is acceptable. The standard errors presented are lower than the sampling errors to the poverty estimates based on the 12 months household surveys. Predictions based on this sample also indicate that the problem of misspecifications of models is not large. It is recommended to test these models at the country level and if the test results are comparable to those here, apply the approach presented.
    Keywords: Stochastic model; Poverty measurement; Money metric poverty; Survey methods
    JEL: C31 C42 C81 D12 D31 I32
    Date: 2005–04
  8. By: Torfinn Harding and Jørn Rattsø (Statistics Norway)
    Abstract: The barrier model of productivity growth suggests that individual country productivity is related to the world technology frontier disturbed by national barriers. We offer a country study of the barrier model exploiting the dramatic changes in the linkages to the world economy in South Africa. The productivity growth in the manufacturing sector panel for 1970-2003 covers a period of political and economic turbulence and international sanctions. The econometric analysis uses tariffs as measure of barrier and fixed effects estimation to concentrate inference to time series properties. The model shows how productivity growth can be understood as a combination of world frontier growth and the tariff barrier to international spillovers. The estimates establish a long run relationship where domestic productivity follows the world frontier and with change of the barrier affecting transitional growth.
    Keywords: Barriers to growth; technology spillover; South Africa; total factor productivity; econometric analysis
    JEL: F13 F43 O11 O33 O55
    Date: 2005–06
  9. By: Juan Carlos Pérez Mesa (Universidad de Almería); Jaime de Pablo Valenciano (Universidad de Almería)
    Abstract: Este artículo trata de servir de introducción a la situación de los países del área sub-sahariana que se caracterizan por tener el menor crecimiento económico y la más baja productividad mundial. En este contexto se analizan cuáles son las principales causas del atraso y se esbozan las soluciones más urgentes, que pasan, entre otras, por: i) el aumento de la inversión extranjera que será posible siempre que se mejoren las garantías de funcionamiento de las instituciones; y ii) el aumento del comercio intra-regional. También se realiza un análisis de correlación entre nivel general económico, desarrollo humano y pobreza
    Keywords: pobreza, crecimiento, comercio, cluster.
    JEL: C6 D5 D9
    Date: 2005–06–06
  10. By: Axel Dreher (Thurgau Institute of Economics & University of Konstanz); Thomas Herzfeld (Department of Agricultural Economics, University of Kiel)
    Abstract: This paper reviews the empirical literature on the economic costs of corruption. Corruption affects economic growth, the level of GDP per capita, investment activity, international trade and price stability negatively. Additionally, it biases the composition of government expenditures. The second part of the paper estimates the effect of corruption on economic growth and GDP per capita as well as on six possible transmission channels. The results of this analysis allows to calculate the total effect of corruption: An increase of corruption by about one index point reduces GDP growth by 0.13 percentage points and GDP per capita by 425 US$.
    Keywords: Costs of Corruption, Survey, Empirical Evidence
    JEL: O1 K49 C39
    Date: 2005–06–02
  11. By: Friedrich Schneider
    Abstract: Estimations of the size and development of the shadow economy for 145 countries, including developing, transition and highly developed OECD economies over the period 1999 to 2003 are presented. The average size of the shadow economy (as a percent of “official” GDP) in 2002/03 in 96 developing countries is 38.7%, in 25 transition countries 40.1%, in 21 OECD countries 16.3% and in 3 Communist countries 22.3%. An increased burden of taxation and social security contributions, combined with a labor market regulation are the driving forces of the shadow economy. Finally, the various estimation methods are discussed and critically evaluated.
    Keywords: shadow economy of 145 countries; tax burden; tax moral; quality of state institutions; regulation; DYMIMIC and other estimation methods
    JEL: O17 O5 D78 H2 H11 H26
    Date: 2005–06

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