nep-afr New Economics Papers
on Africa
Issue of 2006‒07‒02
fourteen papers chosen by
Suzanne McCoskey
Foreign Service Institute, US Department of State

  1. Africa's Trade Revisted By Arvind Subramanian; Natalia T. Tamirisa
  2. Africa in the Doha Round: Dealing with Preference Erosion and Beyond By Yongzheng Yang
  3. Monetary Union in West Africa: An Agency of Restraint for Fiscal Policies By Paul R. Masson; Catherine A. Pattillo
  4. Market access, supplier access, and Africa ' s manufactured exports : an analysis of the role of geography and institutions By Zeufack, Albert; Mengistae, Taye; Elbadawi, Ibrahim
  5. Toward the Enhanced Effectiveness of Foreign Aid By Gustav Ranis
  6. Foreign aid and fiscal policy By Riccardo Faini
  7. Ethnic Fractionalization, Migration and Growth By Julian Weisbrod; Dana Schüler
  8. How effective are poor schools? Poverty and educational outcomes in South Africa By Servaas van der Berg
  9. Rough Road to Market: Institutional Barriers to Innovations in Africa By Oyelaran-Oyeyinka, Banji; Gehl Sampath, Padmashree
  10. Does NGO Aid Go to the Poor? Empirical Evidence from Europe By Boriana Yontcheva; Gilles Nancy
  11. Trade, Peace and Democracy: An Analysis of Dyadic Dispute By Solomon W. Polachek; Carlos Seiglie
  12. Financial Reforms in Sudan: Streamlining Bank Intermediation By Alexei Kireyev
  13. Why Do Prices in Sierra Leone Change So Often? A Case Study Using Micro-level Price Data By Arto Kovanen
  14. The effects of Fair Trade on marginalised producers: an impact analysis on Kenyan farmers By Leonardo Becchetti; Marco Costantino

  1. By: Arvind Subramanian; Natalia T. Tamirisa
    Abstract: The popular impression that Africa has not integrated into world trade, as suggested by the evolution in simple indicators, has been called into question recently by more formal analysis. This paper refines and generalizes this analysis, but lends support to the popular view of disintegration. Africa, especially Francophone Africa, is currently under-exploiting its trading opportunities and has witnessed disintegration over time, a trend that is most pronounced in its trade with the technologically advanced countries.
    Keywords: Trade , Africa , Globalization ,
  2. By: Yongzheng Yang
    Abstract: Improving market access in industrial countries and retaining preferences have been Africa's two key objectives in the Doha Round trade negotiations. This paper argues that African negotiators may have overlooked the potential market access gains in developing countries, where trade barriers remain relatively high and demand for African imports has expanded substantially over the past decades. As reductions in most-favored-nation tariffs in industrial countries will inevitably lead to preference erosion, African countries need to ensure that the Doha Round leads to liberalization in all sectors by all World Trade Organization (WTO) members, so that the resulting gains will offset any losses. Such an outcome is more likely if African countries also offer to liberalize their own trade regimes and focus on reciprocal liberalization as a negotiation strategy rather on preferential and differential treatment.
    Keywords: Multilateral trade negotiations , Africa , World Trade Organization ,
    Date: 2005–11–28
  3. By: Paul R. Masson; Catherine A. Pattillo
    Abstract: Could a West African monetary union (either of the non-CFA countries, or all ECOWAS members) be an effective "agency of restraint" on fiscal policies? We discuss how monetary union could affect fiscal discipline and the arguments for explicit fiscal restraints considered in the European Monetary Union literature, and their applicability to West Africa. The empirical evidence, EMU literature, and CFA experience suggest that monetary union could create the temptation for fiscal profligacy through prospects of a bailout, or costs diluted through the membership. Thus, a West African monetary union could promote fiscal discipline only if the hands of the fiscal authorities are also tied by a strong set of fiscal restraints.
    Keywords: West African Monetary Union , Africa , Fiscal policy , CFA franc , Trade ,
  4. By: Zeufack, Albert; Mengistae, Taye; Elbadawi, Ibrahim
    Abstract: In a large cross-country sample of manufacturing establishments drawn from 188 cities, average exports per establishment are smaller for African firms than for businesses in other regions. The authors show that this is mainly because, on average, African firms face more adverse economic geography and operate in poorer institutional settings. Once they control for the quality of institutions and economic geography, what in effect is a negative African dummy disappears from the firm level exports equation they estimate. One part of the effect of geography operates through Africa ' s lower " foreign market access: " African firms are located further away from wealthier or denser potential export markets. A second occurs through the region ' s lower " supplier access: " African firms face steeper input prices, partly because of their physical distance from cheaper foreign suppliers, and partly because domestic substitutes for importable inputs are more expensive. Africa ' s poorer institutions reduce its manufactured exports directly, as well as indirectly, by lowering foreign market access and supplier access. Both geography and institutions influence average firm level exports significantly more through their effect on the number of exporters than through their impact on how much each exporter sells in foreign markets.
    Keywords: Free Trade,Markets and Market Access,Economic Theory & Research,Access to Markets,Foreign Direct Investment
    Date: 2006–06–01
  5. By: Gustav Ranis (Economic Growth Center, Yale University)
    Abstract: At the very time that professional skepticism concerning the effectiveness of foreign aid has reached new heights, donors seem to be ready to substantially increase the volume of aid they are willing to make available. This paper attempts to address this paradox by first examining the record of aid in the past, distinguishing between cross-country regressions and select country experience. It subsequently proceeds to propose the establishment of a new modus operandi for foreign aid, based on a much more passive, bankerlike posture by donors, leavin the initiative for defining what reforms are feasible, plus the establishment of self-conditionality, to third world recipients before they approach the international community of donors.
    Keywords: Foreign Aid, Development
    JEL: O11 O19
  6. By: Riccardo Faini (Università di Roma Tor Vergata, Centro Studi Luca d’Agliano, IZA and CEPR)
    Abstract: Foreign aid has been on a downward trend since at least the early eighties. Despite the commitments of donor governments, the GDP share of foreign aid for DAC countries has fallen to slightly more than 0,2% in the early part of this decade. The purpose of this paper is to explore the macro determinants of the amount of foreign aid. Surprisingly enough, not much attention has been devoted in the literature to this issue. Most of the research has focussed either on the effectiveness of aid (“does aid promote growth and help alleviating poverty”?) or to the cross country allocation of a given amount of foreign aid (“is foreign aid motivated by donor’s political and commercial interests or by recipients’ needs?”). In both cases, the total aid budget is taken as given and its determinants remain therefore unexplored. Our main finding is that the size of the budget aid is a function of the donor country’s fiscal situation, even after controlling for the government’s political orientation, the cyclical position of the donor economy, and its income per capita level. In light of these results, we argue that advocates of foreign aid should strongly lobby in favour of fiscal discipline. The alternative strategy of pushing for a more lenient budgetary treatment of foreign aid may be loaded with risks, and even turn to be counterproductive, particularly if the list of “virtuous” exceptions becomes exceedingly long. This is exactly what seems to have happened with the revision of the Stability and Growth pact.
    Keywords: foreign aid, fiscal policy
    JEL: F35 E62
    Date: 2006
  7. By: Julian Weisbrod (Georg-August-Universität Göttingen / Germany); Dana Schüler (Georg-August-Universität Göttingen / Germany)
    Abstract: This paper has the aim of contributing to the existing research by analyzing two particular topics. First of all, we update the data set used by Alesina et al.(2003) into the 1990s to analyze the robustness of their results in a wider time range. Furthermore, we analyze whether the effect of ethnic fractionalization is the same in different regions, particularly focusing on Sub-Saharan Africa and Latin America. Secondly, we empirically investigate, if ethnic fractionalization might be positive in a nation which is ethnically diverse due to immigration. We try to distinguish between these two different kinds of ethnic fractionalization in order to determine if the result empirically indicates this multidimensionality of the index of ethnic fractionalization.
    Keywords: Growth, Ethnic Fractionalization, Migration, Cross-country Regression
    Date: 2006–06–27
  8. By: Servaas van der Berg (Department of Economics, Stellenbosch University)
    Abstract: Massive differentials on achievement tests and examinations reflect South Africa’s divided past. Improving the distribution of educational outcomes is imperative to overcome labour market inequalities. Historically white and Indian schools still outperform black and coloured schools in examinations, and intraclass correlation coefficients (rho) reflect far greater between-school variance compared to overall variance than for other countries. SACMEQ’s rich data sets provide new possibilities for investigating relationships between educational outcomes, socio-economic status (SES), pupil and teacher characteristics, school resources and school processes. As a different data generating process applied in affluent historically white schools (test scores showed bimodal distributions), part of the analysis excluded such schools, sharply reducing rho. Test scores were regressed on various SES measures and school inputs for the full and reduced sample, using survey regression and hierarchical (multilevel) (HLM) models to deal with sample design and nested data. This shows that the school system was not yet systematically able to overcome inherited socio-economic disadvantage, and poor schools least so. Schools diverged in their ability to convert inputs into outcomes, with large standard deviations for random effects in the HLM models. The models explained three quarters of the large between-school variance but little of the smaller within-school variance. Outside of the richest schools, SES had only a mild impact on test scores, which were quite low in SACMEQ context.
    Keywords: Analysis of Education
    JEL: J21
    Date: 2006
  9. By: Oyelaran-Oyeyinka, Banji (UNU-MERIT); Gehl Sampath, Padmashree (UNU-MERIT)
    Abstract: Translating R&D and inventive efforts into a market product is characterized by significant financial skills, and the ability to overcome technical and instititonal barriers. Research into and translation of new technologies such as biotechnology products to the market requires even greater resources. This paper aims to understand the key factors that foster or hinder the complex process of translating R&D efforts into innovative products. Different pathways exist in developed countries such as firm-level efforts, the use of IPs, the spin-off of new firms that develop new products, or a mixture of these. Developing countries differ substantially in the kinds of instruments they use because of their considerably weaker institutional environment and for this reason our framework takes a systemic and institutional perspective. The paper comtributes to this issue by examining systemic institutional barriers to commercializing biotechnology in a develping context within a systems of innovation framework.
    Keywords: research and development, biotechnology, commercialization, innovation, Africa, learning, institution building
    JEL: O32 L65 O34 O17
    Date: 2006
  10. By: Boriana Yontcheva; Gilles Nancy
    Abstract: This paper studies the aid allocation of European nongovernmental organizations (NGOs). Once population is controlled for, poverty consistently appears as the main worldwide determinant of NGO aid allocation. NGOs do not respond to strategic considerations. Their funding source does not seem to exert a great influence on their aid allocation decision. We also find differences across regions. Militarization and the political nature of the regime of the recipient country affect aid allocation in the Middle East. Life expectancy influences aid allocation in countries in the Western Hemisphere and the Middle East.
    Date: 2006–02–17
  11. By: Solomon W. Polachek (State University of New York at Binghamton and IZA Bonn); Carlos Seiglie (Rutgers University)
    Abstract: At least since 1750 when Baron de Montesquieu declared "peace is the natural effect of trade," a number of economists and political scientists espoused the notion that trade among nations leads to peace. Employing resources wisely to produce one commodity rather than employing them inefficiently to produce another is the foundation for comparative advantage. Specialization based on comparative advantage leads to gains from trade. If political conflict leads to a diminution of trade, then at least a portion of the costs of conflict can be measured by a nation's lost gains from trade. The greater two nations' gain from trade the more costly is bilateral (dyadic) conflict. This notion forms the basis of Baron de Montesquieu's assertion regarding dyadic dispute. This paper develops an analytical framework showing that higher gains from trade between two trading partners (dyads) lowers the level of conflict between them. It describes data necessary to test this hypothesis, and it outlines current developments and extensions taking place in the resulting trade-conflict literature. Crosssectional evidence using various data on political interactions confirms that trading nations cooperate more and fight less. A doubling of trade leads to a 20% diminution of belligerence. This result is robust under various specifications, and it is upheld when adjusting for causality using cross-section and time-series techniques. Further, the impact of trade is strengthened when bilateral import demand elasticities are incorporated to better measure gains from trade. Because democratic dyads trade more than non-democratic dyads, democracies cooperate with each other relatively more, thereby explaining the "democratic peace" that democracies rarely fight each other. The paper then goes on to examine further extensions of the trade-conflict model regarding specific commodity trade, foreign direct investment, tariffs, foreign aid, country contiguity, and multilateral interactions.
    Keywords: trade, conflict, cooperation, interdependence, gains from trade, dyadic dispute, democratic peace, democracy
    JEL: F01 F51 F59 D74
    Date: 2006–06
  12. By: Alexei Kireyev
    Abstract: The paper reviews the experience of financial reforms in Sudan with a view to assessing their macroeconomic impact and to shedding light on the question why such reforms have not yet brought about visible improvements in financial intermediation. The paper concludes that regardless of the progress achieved in recent years, deficiencies in the reform design, institutional weaknesses, shallow financial markets, shortcomings of the Islamic mode of finance, and strong seasonality remain key factors that constrain financial intermediation. Additional efforts, in particular in bank restructuring, credit instrument design, monetary policy management, and prudential regulation are needed to address the systemic problems of the financial sector and to make it capable of supporting private sector growth.
    Keywords: Bank reforms , Sudan , Financial systems , Islamic banking , Bank supervision , Monetary policy ,
  13. By: Arto Kovanen
    Abstract: We use cross-section and time-series techniques to analyze pricing behavior in Sierra Leone. In cross-sectional data, we find that inflation volatility and product diversification are the main factors explaining differences in the frequency of price adjustments. We show that variance in the fraction of prices subject to change is a key determinant of inflation volatility in Sierra Leone, indicating that retail prices are sensitive to economic events. We explain variations in this fraction over time with past inflation and monetary growth, which are important policy variables.
    Keywords: Inflation , Sierra Leone , Price adjustments ,
    Date: 2006–03–09
  14. By: Leonardo Becchetti (Economics Department, University of Rome “Tor Vergata”); Marco Costantino (FORMEZ, Rome)
    Abstract: We analyse the impact of Fair Trade (FT) affiliation on monetary and non monetary measures of well-being on a sample of Kenyan farmers. Our econometric findings document significant differences in terms of price satisfaction, monthly household food consumption, (self declared) income satisfaction, dietary quality and child mortality for Fair Trade and Meru Herbs (first level local producers organisation) affiliated with respect to a control sample. Methodological problems such as the FT vis à vis Meru Herbs relative contribution, control sample bias, FT and Meru Herb selection biases are discussed and addressed. After reconstructing the dynamics of human capital investment in the observed households we show that affiliation to the younger vintage FT project is associated to a significantly higher schooling investment.
    Keywords: impact analysis, child labour, fair trade, monetary and non monetary wellbeing
    JEL: O19 O22 D64
    Date: 2006

This nep-afr issue is ©2006 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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