nep-afr New Economics Papers
on Africa
Issue of 2005‒12‒09
twelve papers chosen by
Suzanne McCoskey
Foreign Service Institute, US Department of State

  1. HIV/AIDS Pandemic in Africa: Trends and Challenges By Livingstone S. Luboobi; Joseph Y.T. Mugisha
  2. Dependence on Primary Commodities and Poverty Traps in Sub-Saharan Africa: Devising strategies and building capabilities for diversification By Habiyaremye, Alexis
  3. Privatization in Africa: What has happened? What is to be done? By John Nellis
  4. Income and Democracy By Acemoglu, Daron; Johnson, Simon; Robinson, James A; Yared, Pierre
  5. A Micro-Macro Model for South Africa: Building and Linking a Microsimulation Model to a CGE Model By Nicolas Hérault
  6. The Evolution of Enterprise Reform in Africa: From State-owned Enterprises to Private Participation in Infrastructure — and Back? By John Nellis
  7. Improving Trade and Transport Services in Tanzania: A General Equilibrium Approach By Elina Eskola
  8. Shocks, Sensitivity and Resilience: Tracking the Economic Impacts of Environmental Disaster on Assets in Ethiopia and Honduras By Michael Carter; Peter Little; Tewodaj Mogues; Workneh Negatu
  9. The Evolution of International Output Differences (1960-2000): From Factors to Productivity By Pedro Cavalcanti Ferreira; Samuel de Abreu Pessôa; Fernando A. Veloso
  10. Volatility and Development By Koren, Miklós; Tenreyro, Silvana
  11. A Poverty and Inequality Impact Assessment of Liberalization of Water Utility in Senegal: A Macro-Micro Analysis By Dorothée Boccanfuso; Luc Savard
  12. Who Benefits from New Medical Technologies? Estimates of Consumer and Producer Surpluses for HIV/AIDS Drugs By Tomas J. Philipson; Anupam B. Jena

  1. By: Livingstone S. Luboobi (Makerere University); Joseph Y.T. Mugisha (Makerere University)
    Abstract: Three-quarters of the world’s AIDS population lives in Sub-Saharan Africa; most have no access to lifesaving drugs, testing facilities or even basic preventative health care. One of the major factors inhibiting medical professionals in Africa from treating this disease is the inability to access vast areas of the continent with adequately equipped medical facilities. To meet this need, Architecture for Humanity challenged the world’s architects and health care professionals to submit designs for a mobile HIV/AIDS health clinic. The pandemic is changing the demographic structure of Africa and wiping out life expectancy gains. Indeed, in many African countries, life expectancy is dropping from more than 60 years to around 45 years or even less. In this paper, we highlight the uniqueness of factors associated with HIV/AIDS pandemic in Africa and present its impact and challenges.
    Keywords: HIV/AIDS, Africa
    JEL: I18 J11
    Date: 2005–09
  2. By: Habiyaremye, Alexis (United Nations University, Institute for New Technologies)
    Abstract: This paper analyses the poverty traps problem of Sub-Saharan African (SSA) countries and their dependence on a few primary export commodities in their trade relationships with the rest of the world. We argue that traditional approaches to development and industrialization have failed to take account of the necessity of building appropriate technological capability for SSA countries to acquire, master and effectively apply modern technologies. Taking lessons from the failure of these traditional approaches, w e place the national systems of innovation (NSI) approach and the adequate technological capability building (TCB) at the source of economic diversification needed to reduce dependence on primary commodities and disentangle poverty traps in SSA countries.
    Keywords: systems of innovation, technology policy, economic development, industrialization, poverty, capability building, primary commodities, natural resources, sub-saharan africa
    Date: 2005
  3. By: John Nellis (The Center for Global Development)
    Abstract: Sub-Saharan African states urgently need expanded and more dynamic private sectors, more efficient and effective infrastructure/utility provision, and increased investment from both domestic and foreign sources. Privatization is one way to address these problems. But African states have generally been slow and reluctant privatizers; a good percentage of industrial/manufacturing and most infrastructure still remains in state hands. Given prevailing public hostility towards privatization, and widespread institutional weaknesses, such caution is defensible, but nonetheless very costly. The long-run and difficult solution is the creation and reinforcement of the institutions that underpin and guide proper market operations. In the interim, African governments and donors have little choice but to continue to experiment with the use of externally supplied substitutes for gaps in local regulatory and legal systems.
    Keywords: Privatization, Sub-Saharan Africa
    JEL: F3 L3 N17 N27 N47 N77 O55
    Date: 2005–10
  4. By: Acemoglu, Daron; Johnson, Simon; Robinson, James A; Yared, Pierre
    Abstract: We revisit one of the central empirical findings of the political economy literature that higher income per capita causes democracy. Existing studies establish a strong cross-country correlation between income and democracy, but do not typically control for factors that simultaneously affect both variables. We show that controlling for such factors by including country fixed effects removes the statistical association between income per capita and various measures of democracy. We also present instrumental-variables estimates using two different strategies. These estimates also show no causal effect of income on democracy. Furthermore, we reconcile the positive cross-country correlation between income and democracy with the absence of a causal effect of income on democracy by showing that the long-run evolution of income and democracy is related to historical factors. Consistent with this, the positive correlation between income and democracy disappears, even without fixed effects, when we control for the historical determinants of economic and political development in a sample of former European colonies.
    Keywords: democracy; economic growth; institutions; political development
    JEL: O10 P16
    Date: 2005–10
  5. By: Nicolas Hérault (Centre d'Économie du Développement (IFReDE-GRES) Université Montesquieu Bordeaux IV and Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: This paper describes a newly-built micro-macro model for South Africa. A computable general equilibrium (CGE) model and a microsimulation (MS) model are combined in a sequential approach in order to build an effective tool to assess the effects of various macroeconomic policies and shocks on South African households. The CGE model is used to simulate the macro-changes in the structure of the economy after the policy change or the macro-shock. In a second step, these changes are passed on to the MS model. Micro-macro consistency equations, along with the direct transmission of prices, ensure that macro-changes are fully transmitted from the CGE to the MS model. Given any change in the macroeconomic structure of the economy predicted by the CGE model, the MS model predicts how individual agents modify their behaviours and how their incomes are affected, while accounting for individual heterogeneity.
    Date: 2005–11
  6. By: John Nellis (The Center for Global Development)
    Abstract: Many African state-owned enterprises (SOEs), particularly those in infrastructure, have a long history of poor performance. From the outset, SOE financial and economic performance generally failed to meet the expectations of their creators and funders. By the late 1970s, the situation was alarming, and by early 1980s, critical. The poor financial performance of SOEs became so burdensome to government budgets that it attracted the attention of the international financial institutions, or IFIs. In response, in the 1980s, the World Bank approved SOE reforms that could be summed up in the term “commercialization”. By the mid-1990s, however, the idea of making SOEs function efficiently and effectively under government management was largely abandoned by the IFIs and privatization and private participation in infrastructure, or PPI became the order of the day. Once more, however, the results were disappointing. PPI has not been as widely adopted as anticipated, nor has it generated the massive resources and changes hoped for, nor has it been widely accepted as beneficial by the African public. The findings of recent studies in Africa suggest that PPI should not be jettisoned, and that the more productive path is to recognize the limitations of the approach, and to work harder at creating the conditions needed to make it function effectively. This will entail, as many have recognized, an end to the view that public and private infrastructure provision is a dichotomy – a case of either-or, one or the other – and a better appreciation of the extent to which the performance of each is dependent on the competence of the other. In other words, for the private sector to perform well, public sector capacity must be enhanced. Moreover, proposed tactics of reform should fit more closely with the expectations and sentiments of the affected government, consumer base, and general population. This broader approach implies, probably, a reduction in the scope and, certainly, a reduction in the planned speed of operations. Improving infrastructure performance is a long-term matter.
    Keywords: Africa, Enterprise reform, State-owned enterprises, Privatization
    JEL: F3 L3 N17 N27 N47 N77 O55
    Date: 2005–09
  7. By: Elina Eskola (Department of Economics, University of Copenhagen)
    Abstract: The study uses a computable general equilibrium (CGE) approach to simulate the welfare gains of improving trade and transport services in Tanzania up to the year 2015. The model takes into account the regional differences in trading margins and the different production patterns of commercial and subsistence producers. The results show that substantial economic growth can be achieved by alleviating the existing bottle necks in marketing. The regional growth patterns of production after market improvement favour the more isolated and often poorer regions, leading to decreased regional inequality over time. The main beneficiaries of the policy change are the rural poor whose income grows faster than the income of the wealthier urban dwellers. The results suggest, that if sufficient resources and political commitment to improving trade and transport sectors can be mobilised, the economic performance can be enhanced to reach the Millennium Development Goals by 2015.
    Keywords: computable general equilibrium (CGE); regional growth; commercialisation; infrastructure; trade; pro-poor growth; Tanzania; millennium development goals
    JEL: C68 D58 F14 I38 O55
    Date: 2005–11
  8. By: Michael Carter (University of Wisconsin); Peter Little (University of Kentucky); Tewodaj Mogues (International Food Policy Research Institute); Workneh Negatu (Addis Abeba University)
    Abstract: Droughts, hurricanes and other environmental shocks punctuate the lives of poor and vulnerable populations in many parts of the world. The direct impacts can be horrific, but what are the longer-term effects of such shocks on households and their livelihoods? Under what circumstances, and for what types of households, will shocks push households into poverty traps from which recovery is not possible? In an effort to answer these questions, this paper analyzes the asset dynamics of Ethiopian and Honduran households in the wake of severe environmental shocks. While the patterns are different across countries, both reveal worlds in which the poorest households struggle most with shocks, adopting coping strategies which are costly in terms of both short term and long term well-being. There is some evidence that shocks threaten long term poverty traps and that they tend to militate against any tendency of the poor to catch up with wealthier households. Policy implications are discussed in terms of access to markets and the design of government safety net programs.
    Keywords: Ethiopia; Honduras; Shocks; Drought; Hurricanes; Assets; Poverty traps; Asset smoothing; Social capital
    JEL: O P
    Date: 2005–11–29
  9. By: Pedro Cavalcanti Ferreira (EPGE/FGV); Samuel de Abreu Pessôa (EPGE/FGV); Fernando A. Veloso (IBMEC Business School - Rio de Janeiro)
    Abstract: This article presents a group of exercises of level and growth decomposition of output per worker using cross-country data from 1960 to 2000. It is shown that at least until 1975 factors of production (capital and education) were the main source of output dispersion across economies and that productivity variance was considerably smaller than in later years. Only after this date did the prominence of productivity start to show up in the data, as the majority of the literature has found. The growth decomposition exercises showed that the reversal of relative importance of productivity vis-a-vis factors is explained by the very good (bad) performance of productivity of fast- (slow-) growing economies. Although growth in the period, is on average, is mostly due to factor accumulation, its variance is explained by productivity.
    Keywords: Cross-Country Income Inequality, Development, Total Factor Productivity, Aggregate Production Function, Growth Decomposition
    JEL: O11 O47
    Date: 2005–11–30
  10. By: Koren, Miklós; Tenreyro, Silvana
    Abstract: Why is GDP growth so much more volatile in poor countries than in rich ones? We identify four possible reasons: (i) poor countries specialize in more volatile sectors; (ii) poor countries specialize in fewer sectors; (iii) poor countries experience more frequent and more severe aggregate shocks (e.g. from macroeconomic policy); and (iv) poor countries' macroeconomic fluctuations are more highly correlated with the shocks of the sectors they specialize in. We show how to decompose volatility into these four sources, quantify their contribution to aggregate volatility, and study how they relate to the stage of development. We document the following regularities. First, as countries develop, their productive structure moves from more volatile to less volatile sectors. Second, the level of specialization declines with development at early stages, and slowly increases at later stages of development. Third, the volatility of country- specific macroeconomic shocks falls with development. Fourth, the covariance between sector-specific and country-specific shocks does not vary systematically with the level of development. We argue that many theories linking volatility and development are not consistent with these findings and suggest new directions for future theoretical work.
    Keywords: development; diversification; economic fluctuations; specialization; volatility
    JEL: E32 O11 O14
    Date: 2005–10
  11. By: Dorothée Boccanfuso (GREDI, Faculte d'administration, Université de Sherbrooke); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke)
    Abstract: Many argued that water accessibility to the poor has been improved with the privatization of water utilities and that privatization on the whole has been beneficial to the poor households. In this paper, we used a multi-household integrated CGE model to analyze the impact of the privatization of the water utilities in Senegal on poverty and inequality and we also present a distributional analysis of water distribution before and after privatization to verify is the privatization process has been pro-poor. We simulate OPEX and CAPEX strategies and analyze how they affect government finances and other key macro and sectoral variables and attempt to measure the impact on poverty and inequality of different groups of households. The simulated price increases for the utility sector, have marginal effects on government finances and positive effects on most groups and negative effects on others agents.
    Keywords: computable general equilibrium model, micro-simulation, poverty analysis, income distribution, privatization, water utilities
    JEL: D58 D31 I32 L33 L93
    Date: 2005
  12. By: Tomas J. Philipson; Anupam B. Jena
    Abstract: The social value of an innovation is comprised of the value to consumers and the value to innovators. We estimate that for the HIV/AIDS therapies that entered the market from the late 1980's onwards, innovators appropriated only 5% of the social surplus arising from these new technologies. Despite the high annual costs of these drugs to patients, the low share of social surplus going to innovators raises concerns about advocating cost-effectiveness criteria that would further reduce this share, and hence further reduce incentives for innovation.
    JEL: I1
    Date: 2005–12

This nep-afr issue is ©2005 by Suzanne McCoskey. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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