nep-afr New Economics Papers
on Africa
Issue of 2006‒09‒03
eight papers chosen by
Suzanne McCoskey
Foreign Service Institute, US Department of State

  1. Privatization in Africa: What has Happened? What is to be Done? By John Nellis
  2. The Many Paths of Cotton Sector Reform in Eastern and Southern Africa: Lessons from a Decade of Experience By David Tschirley; Colin Poulton; Duncan Boughton
  3. The Surprise Party: An Analysis of US ODA Flows to Africa By Markus P. Goldstein; Todd J. Moss
  4. Does Aid for Education Educate Children? Evidence from Panel Data By Axel Dreher; Peter Nunnenkamp; Rainer Thiele
  5. The Millennium Challenge Account: How Much is Too Much, How Long is Long Enough? By Michael A. Clemens; Steven Radelet
  6. New Data, New Doubts: Revisiting "Aid, Policies, and Growth" By William Easterly; Ross Levine; David Roodman
  7. The Anarchy of Numbers: Aid, Development, and Cross-country Empirics—Revised July 2004 By David Roodman
  8. Economics of Conflict: An Overview By Michelle R. Garfinkel; Stergios Skaperdas

  1. By: John Nellis
    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: Sub-Saharan Africa, privatization, investment
    JEL: K23 O55 L33 L50 L60 F21
  2. By: David Tschirley (Department of Agricultural Economics, Michigan State University); Colin Poulton; Duncan Boughton
    Abstract: This paper assesses the record of five countries in southern and eastern Africa: Tanzania, Uganda, Zimbabwe, Zambia, and Mozambique. The paper focuses on the course of reform in each – initial conditions, key elements of the reform, and institutional response to it – and draws lessons for policy makers, donors, and researchers.
    Keywords: food security, food policy, cotton reform
    JEL: Q18
    Date: 2006
  3. By: Markus P. Goldstein; Todd J. Moss
    Abstract: Conventional wisdom about US foreign policy toward Africa contains two popular assumptions. First, Democrats are widely considered the party most inclined to care about Africa and the most willing to spend resources on assistance to the continent. Second, the end of the Cold War was widely thought to have led to a gradual disengagement of the US from Africa and reduced American attention toward the continent. This paper analyzes OECD data on US foreign assistance flows from 1961-2000 and finds that neither of these assumptions is true.
    Keywords: U.S. foreign policy, Africa, democrats, cold war
    JEL: O55 F35
  4. By: Axel Dreher; Peter Nunnenkamp; Rainer Thiele
    Abstract: This paper empirically analyzes the impact of aid on education for about 100 countries over the period 1970-2005. We estimate a system of equations to test whether and to what extent the impact of sector-specific aid on educational attainment depends on (i) the extent to which aid adds to overall educational expenditure of the recipient government, (ii) the strength of the link between government expenditure and education, (iii) the quality of institutions in the recipient country, and (iv) whether aid encourages institutional reforms. According to our results, aid significantly increases primary school enrolment. This result is robust to the method of estimation, employing instruments to control for the endogeneity of aid, and the measure of institutional quality employed. The degree of institutional quality, however, has no robust impact on this relationship
    Keywords: Aid effectiveness, Education, Sector-specific aid
    JEL: F35 O11 H52 I22
    Date: 2006–08
  5. By: Michael A. Clemens; Steven Radelet
    Abstract: The US government’s proposed $5 billion Millennium Challenge Account (MCA) could provide upwards of $250-$300m or more per year per country in new development assistance to a small number of poor countries judged to have relatively “good” policies and institutions. Could this assistance be too much of a good thing and strain the absorptive capacity of recipient countries to use the funds effectively? Empirical evidence from the past 40 years of development assistance suggests that in most potential MCA countries, the sheer quantity of MCA money is unlikely to overwhelm the ability of recipients to use it well, if the funds are delivered effectively. There may be a small number of potential recipients—mostly very small economies already receiving substantial amounts of aid—in which MCA money might be so bountiful as to surpass recipient governments’ absorptive capacity. Strong monitoring and evaluation is the key to detecting and correcting possible absorptive capacity problems, rather than ad-hoc rules limiting the amount of assistance. Where problems do arise, funds should be re-allocated to other activities within the country or to other MCA countries, or the list of countries qualifying for the MCA could be expanded slightly to include a small number of additional countries that may be able to use the funds effectively. We also explore the length of time that the USG should be prepared to continue to fund MCA countries, and how recipients might exit from MCA funding over time. We look back at two dozen ‘good policy’ countries that previously were very poor but have grown and developed after receiving large amounts of aid—one might call them the ideal MCA candidates of the 1970s. Their experience suggests that (1) unlike some other countries, they used aid well, and (2) these “best case scenarios” required stable and moderately sizeable aid commitments lasting decades. This experience suggests that even the best performing of the MCA countries are likely to require significant assistance for many years. The idea of a brief, big-bang “Marshall Plan” for developing countries in which the MCA provides a large amount of funding for a short period of time in hopes of igniting rapid development is probably wishful thinking.
    Keywords: Millennium Challenge Account (MCA), development assistance, monitoring and evaluation, absorptive capacity
    JEL: F35 O15 O19 O40 O57
  6. By: William Easterly; Ross Levine; David Roodman
    Abstract: The Burnside and Dollar (2000) finding that aid raises growth in a good policy environment has had an important influence on policy and academic debates. We conduct a data gathering exercise that updates their data from 1970–93 to 1970–97, as well as filling in missing data for the original period 1970–93. We find that the BD finding is not robust to the use of this additional data.
    Keywords: economic policy, economic growth
    JEL: F35 O23 O40
  7. By: David Roodman
    Abstract: Contemporary econometric literature has generated a large number of stories of the relationship between how much foreign aid a countries receives and how it grows. All the stories hinge on the statistical significance in cross-country regressions of a quadratic term involving aid. Among the stories are that aid raises growth (on aver-age) 1) in countries where economic policies are good; 2) in countries where policies are good and a civil war recently ended; 3) in all countries, but with diminishing returns; 4) in countries outside the tropics; 5) in countries with difficult economic environments, characterized by declining or volatile terms of trade, natural disasters, or low population; or 6) when aid increases in countries experiencing negative export price shocks. The diversity of results prima facie suggests that many are fragile. Easterly et al. (2004) find the aid-policy story (Burnside and Dollar, 2000) to be fragile in the face of an expansion of the data set in years and countries. The present study expands that analysis by applying more tests, and to more studies. Each test involves altering just one aspect of the regressions. All 19 tests are derived from sources of variation that are minimally arbitrary. Twelve derive from specification differences between studies, what Leamer (1983) calls “whimsy.” Three derive from doubts about the appropriateness of the definition of one variable in one study. The remaining four derive from the passage of time, which allows sample expansion. This design allows an examination of the role of “whimsy” in the results that are tested while minimizing “whimsy” in the testing itself. Among the stories examined, the aid-policy link proves weakest, while the aid-tropics link is most robust.
    Keywords: foreign aid, economic development, cross-country empirics
    JEL: F35 O10 Q54 R11 O47
  8. By: Michelle R. Garfinkel (Department of Economics, University of California-Irvine); Stergios Skaperdas (Department of Economics, University of California-Irvine)
    Abstract: In this chapter, we review the recent literature on conflict and appropriation. Allowing for the possibility of conflict, which amounts to recognizing the possibility that property rights are not perfectly and costlessly enforced, represents a significant departure from the traditional paradigm of economics. The research we emphasize, however, takes an economic perspective. Specifically, it applies conventional optimization techniques and game-theoretic tools to study the allocation of resources among competing activities— productive and otherwise appropriative, such as grabbing the product and wealth of others as well as defending one’s own product and wealth. In contrast to other economic activities in which inputs are combined cooperatively through production functions, the inputs to appropriation are combined adversarially through technologies of conflict. A central objective of this research is to identify the effects of conflict on economic outcomes: the determinants of the distribution of output (or power) and how an individual party’s share can be inversely related to its marginal productivity; when settlement in the shadow of conflict and when open conflict can be expected to occur, with longer time horizons capable of inducing conflict instead of settlement; how conflict and appropriation can reduce the appeal of trade; the determinants of alliance formation and the importance of intra-alliance commitments; how dynamic incentives for capital accumulation and innovation are distorted in the presence of conflict; and the role of governance in conflict management.
    Keywords: Anarchy; Bargaining; Conflict technology; Economic growth; Exchange; Governance; Group formation; Open conflict; Power; Shadow of the future
    JEL: D30 D70 D72 D74 H56 O17
    Date: 2006–04

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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