nep-afr New Economics Papers
on Africa
Issue of 2007‒01‒13
sixteen papers chosen by
Suzanne McCoskey
Foreign Service Institute, US Department of State

  1. Road network upgrading and overland trade expansion in Sub-Saharan Africa By Buys, Piet; Deichmann, Uwe; Wheeler, David
  2. Can Sub-Saharan Africa leap into global network trade ? By Subramanian, Uma; Matthijs, Matthias
  3. Strengthening Policy Coherence for Development in Agricultural Policy: Policy Recommendations to Irish Aid By Alan Matthews; Hannah Chaplin; Thomas Giblin; Marian Mraz
  4. Aid Effectiveness and Limited Enforceable Conditionality By Almuth Scholl
  5. Orphans and Schooling in Africa: A Longitudinal Analysis By David Evans; Edward Miguel
  6. Death and Development By Peter Lorentzen; John McMillan; Romain Wacziarg
  7. Looking ahead optimally in allocating aid By Adrian Wood (QEH)
  8. Water allocation strategies for the Kat Basin in South Africa : comparing negotiation tools and game theory models By Dinar, Ariel; Farolfi, Stefano; Patrone, Fioravante; Rowntree, Kate
  9. The impact of commodity price changes on rural households : the case of coffee in Uganda By Bussolo, Maurizio; Godart, Olivier; Lay, Jann; Thiele, Rainer
  10. Inefficient Policies, Inefficient Institutions and Trade By Ruben Segura-Cayuela
  11. The Coherence of Trade Flows and Trade Policies with Aid and Investment Flows By Akiko Suwa-Eisenmann
  12. Adult mortality and consumption growth in the age of HIV/AIDS By Beegle, Kathleen; De Weerdt, Joachim; Dercon, Stefan
  13. Willingness to Pay For the Quality and Intensity of Medical Care: Evidence from Low Income Households in Ghana By Victor Lavy; John Quigley
  14. Beyond dualism: Multisegmented labor markets in Ghana By James Heintz; Fabian Slonimczyk
  15. Overlapping Generations Models of an Age-Group Society: The Rendille of Northern Kenya By Merwan H. Engineer; Ming Kang; Eric Roth; Linda Welling
  16. An assessment of reform options for the public service pension fund in Uganda By Bogomolova, Tatiana; Impavido, Gregorio; Pallares-Miralles, Montserrat

  1. By: Buys, Piet; Deichmann, Uwe; Wheeler, David
    Abstract: Recent research suggests that isolation from regional and international markets has contributed significantly to poverty in many Sub-Saharan African countries. Numerous empirical studies identify poor transport infrastructure and border restrictions as significant deterrents to trade expansion. In response, the African Development Bank has proposed an integrated network of functional roads for the subcontinent. Drawing on new econometric results, the authors quantify the trade-expansion potential and costs of such a network. They use spatial network analysis techniques to identify a network of primary roads connecting all Sub-Saharan capitals and other cities with populations over 500,000. The authors estimate current overland trade flows in the network using econometrically-estimated gravity model parameters, road transport quality indicators, actual road distances, and estimates of economic scale for cities in the network. Then they simulate the effect of feasible continental upgrading by setting network transport quality at a level that is functional, but less highly developed than existing roads in countries like South Africa and Botswana. The authors assess the costs of upgrading with econometric evidence from a large World Bank database of road project costs in Africa. Using a standard approach to forecast error estimation, they derive a range of potential benefits and costs. Their baseline results indicate that continental network upgrading would expand overland trade by about $250 billion over 15 years, with major direct and indirect benefits for the rural poor. Financing the program would require about $20 billion for initial upgrading and $1 billion annually for maintenance. The authors conclude with a discussion of supporting institutional arrangements and the potential cost of implementing them.
    Keywords: Transport Economics Policy & Planning,Common Carriers Industry,Rural Roads & Transport,Transport and Trade Logistics,Economic Theory & Research
    Date: 2006–12–01
  2. By: Subramanian, Uma; Matthijs, Matthias
    Abstract: This paper examines opportunities for Sub-Saharan African countries to effectively participate in globalization, particularly given the increasing interest of China and India in Sub-Saharan Africa. How can Sub-Saharan Africa fully engage and gain benefits from global network trade? Over the past 15 years Asia has become Africa ' s fastest growing export market. Asian countries are much more open to trade than Europe or America. There seems to be no evidence to suggest that this trend will not continue in the near future. The authors acknowledge the numerous caveats in Asia ' s growing interest in the African continent, not least the " resource curse " of exports that are heavily concentrated on oil, minerals, and raw materials, as well as the fierce competition from Asia ' s cheap manufactured exports. However, they believe that there is strong evidence to suggest a clear potential for South-South cooperation in trade and investment. Drawing on evidence from their extensive research into international value chains, the authors identify five critical factors for effective participation in global network trade: price, speed-to-market, labor productivity, flexibility, and product quality. Underlying competitive performance of these critical factors are a country ' s policies and institutions. Effective policies, efficient institutions, and the necessary infrastructure will ensure the best outcome for trading countries. To improve the depth and sustainability of these five critical factors, it is important that developing countries create a supportive policy and institutional framework from the outset.
    Keywords: Markets and Market Access,Economic Theory & Research,Access to Markets,Transport Economics Policy & Planning,Transport and Trade Logistics
    Date: 2007–01–01
  3. By: Alan Matthews; Hannah Chaplin; Thomas Giblin; Marian Mraz
    Abstract: The recent White Paper on Irish Aid made coherence one of the guiding principles of Ireland 's development cooperation policy (Government of Ireland, 2006). Agriculture is at the heart of much of the debate about possible incoherence between trade and development policy. This paper presents the policy recommendations made to the Advisory Board for Irish Aid arising from a research project it supported to examine the impact which the EU's Common Agricultural Policy has on developing countries, and the impact which CAP reform would have on global poverty, and which was undertaken by a team based at the IIIS, Trinity College Dublin. Concluding the Doha Round with an ambitious reduction in agricultural trade barriers should remain the priority objective from a policy coherence perspective . However, the research recognised that Ireland 's partner countries in Sub-Saharan Africa are not likely to benefit, if at all, from further reductions in OECD country agricultural trade barriers, largely because of their preferential access to these markets. We recommend that Irish Aid should increase its efforts to strengthen the supply-side capacity of these countries to take advantage of existing market opportunities, through increased assistance for agricultural and rural development and as well as trade-related assistance. The paper also discusses how a framework for policy coherence might be established within Irish public administration.
    Keywords: Policy coherence, agricultural development, aid, Common Agricultural Policy
    Date: 2007–01–05
  4. By: Almuth Scholl (Economics, Institute of Economic Policy Humboldt University Berlin)
    Abstract: This paper analyzes optimal foreign aid policy in a neoclassical framework with a conflict of interest between the donor and the recipient government. Aid conditionality is modelled as a limited enforceable contract. We define conditional aid policy to be self-enforcing if, at any point in time, the conditions imposed on aid funds are supportable by the threat of a permanent aid cutoff from then onward. Quantitative results show that the effectiveness of unconditional aid is low while self-enforcing conditional aid strongly stimulates the economy. However, increasing the welfare of the poor comes at a high cost: to ensure aid effectiveness, less democratic political regimes have to receive permanently larger aid funds
    Keywords: foreign aid, conditionality, limited enforceable contracts, growth, sovereignty
    JEL: E13 F35 O1 O19
    Date: 2006–12–03
  5. By: David Evans (Department of Economics, Harvard University); Edward Miguel (Department of Economics, University of California, Berkeley)
    Abstract: AIDS deaths could have a major impact on economic development by affecting the human capital accumulation of the next generation. We estimate the impact of parent death on primary school participation using an unusual five-year panel data set of over 20,000 Kenyan children. There is a substantial decrease in school participation following a parent death, and a smaller drop before the death (presumably due to pre-death morbidity). Estimated impacts are smaller in specifications without individual fixed effects, suggesting that estimates based on cross-sectional data are biased toward zero. Effects are largest for children whose mothers died, and those with low baseline academic performance.
    Keywords: Parent death, education, HIV/AIDS, Africa,
    Date: 2006–06–27
  6. By: Peter Lorentzen (Graduate School of Business Stanford University); John McMillan; Romain Wacziarg
    Abstract: Analyzing a variety of cross-national and sub-national data sources, we show that high adult mortality reduces economic growth by shortening time horizons. Higher adult mortality is associated with increased levels of risky behavior, higher fertility and lower investment in physical and human capital. Furthermore, the feedback effect from economic prosperity to better healthcare implies that mortality could be the source of a poverty-trap. In our regressions, adult mortality explains almost all of Africa's growth tragedy over the past forty years. Our analysis also supports grim forecasts of the long-run economic costs of the ongoing AIDS epidemic.
    Keywords: mortality, fertility, human capital, growth, investment
    JEL: I10
    Date: 2006–12–03
  7. By: Adrian Wood (QEH)
    Abstract: The Collier-Dollar approach to aid allocation has been less than fully embraced by donors – even those focused on poverty reduction – and has come into conflict with a different approach based on the Millennium Development Goals. These two approaches are shown to be special cases of a more general model of optimal aid allocation, in which donors care about future as well as current poverty. The model is illustratively applied to data for developing regions. Adding a poverty decline adjustment to the allocation formulae now used by aid agencies would make these formulae more efficient and more acceptable.
  8. By: Dinar, Ariel; Farolfi, Stefano; Patrone, Fioravante; Rowntree, Kate
    Abstract: Governments and developing agencies promote participatory approaches in solving common pool resource problems, such as in the water sector. Two main participatory approaches have been applied separately, namely negotiation and mediation. In this paper the authors apply the Role-Playing Game that is a component of the Companion Modeling approach, a negotiation procedure, and the Cooperative Game Theory (Shapley value and the Nucleolus solution concepts) that can be mirrored as a mediated mechanism to a water allocation problem in the Kat watershed in South Africa. While the absolute results of the two approaches differ, the negotiation and the cooperative game theory provide similar shares of the benefit allocated to the players from various cooperative arrangements. By evaluating the two approaches, the authors provide useful tips for future extension for both the Role-Playing Games and the Cooperative Game Theory applications.
    Keywords: Water Supply and Systems,Water Supply and Sanitation Governance and Institutions,Environmental Economics & Policies,Water Conservation,Town Water Supply and Sanitation
    Date: 2006–12–01
  9. By: Bussolo, Maurizio; Godart, Olivier; Lay, Jann; Thiele, Rainer
    Abstract: Policies and external shocks affecting agriculture, the main source of income for rural households, can be expected to have a significant impact on poverty. The authors study the case of Uganda. Throughout the 1990s, more than 90 percent of its poor lived in rural areas and, during the same period, large international price fluctuations as well as an extensive domestic deregulation affected the coffee sector, its main source of export revenues. Using data from three household surveys covering the 1990s, the authors confirm a strong correlation between changes in coffee prices (in a liberalized market) and poverty reduction. This is highlighted by comparing the performance of different households grouped according to their dependence on coffee farming. Regression analysis (based on pooled data from the three surveys) of consumption expenditure on coffee-related variables, other controls, and time-fixed effects corroborates that the mentioned correlation is not spurious. The authors also find that while both poor and rich farmers enter the coffee sector, the price boom benefits the poorer households relatively more, whereas the liberalization seems to create more opportunities for richer farmers. Finally, notwithstanding the importance of the coffee price boom, the agricultural policy framework and the thorough structural reforms in which the coffee market liberalization was embedded have certainly played a role in triggering overall agricultural growth. These factors appear to matter especially in the second half of the 1990s when prices went down but poverty reduction continued.
    Keywords: Crops & Crop Management Systems,Markets and Market Access,Rural Poverty Reduction,Access to Markets
    Date: 2006–12–01
  10. By: Ruben Segura-Cayuela
    Abstract: Despite the general belief among economists on the growth-enhancing role of international trade and significant trade opening over the past 25 years, the growth performance of many developing economies, especially of those in Latin America and Africa, has been disappointing. While this poor growth performance has many potential causes, in this paper I argue that part of the reason may be related to the interaction between weak institutions and trade. In particular, I construct a model in which trade opening in societies with weak institutions (in particular autocratic and elite-controlled political systems) may lead to worse economic policies. The reason is that general equilibrium price effects of taxation and expropriation in closed economies also hurt the elites, and this puts a natural barrier against inefficient policies. Trade openness removes this barrier and enables groups with political power to exercise this power in more inefficient ways
    Keywords: Trade, Institutions, Expropriation
    JEL: F10 O10
    Date: 2006–12–03
  11. By: Akiko Suwa-Eisenmann
    Abstract: This paper provides a theoretical and empirical overview of the relationships among trade, aid and FDI, both in terms of policy interactions and interactions among resource flows. Aid flows from one country to another can have positive or negative effects on trade flows between those countries. These effects, in turn, may act at two different levels. There are macro-level links between aid and trade: aid enhances saving, permitting more imports, or aid raises the real exchange rate, depressing exports. There are also micro-level mechanisms: tied aid may increase exports if it is spent on enhancing trade capacity, but other forms of tied aid merely lead to allocative inefficiency. Aid flows can affect trade policy in the developing country that... <BR>Cet article fournit une vue d’ensemble à la fois théorique et pratique des relations existant entre les échanges, l’aide et les IDE, à la fois en termes d’interactions politiques et d’interactions entre les flux de ressources. Les flux d’aides d’un pays à un autre peuvent avoir des effets positifs ou négatifs sur les flux commerciaux des pays concernés. Ces effets peuvent agir à deux différents niveaux. Il existe ainsi des liens macroéconomiques entre l’aide et le commerce : l’aide fait augmenter l’épargne, ce qui permet plus d’importations, ou alors l’aide fait monter le taux de change réel, ce qui diminue les exportations. Il existe également des mécanismes microéconomiques : une aide liée peut augmenter les exportations si elle est utilisée pour le...
    Date: 2006–08
  12. By: Beegle, Kathleen; De Weerdt, Joachim; Dercon, Stefan
    Abstract: The authors use a 13-year panel of individuals in Tanzania to assess how adult mortality shocks affect both short and long-run consumption growth of surviving household members. Using unique data which tracks individuals from 1991 to 2004, they examine consumption growth, controlling for a set of initial community, household and individual characteristics. The effect is identified using the sample of households in 2004 which grew out of baseline households. The authors find robust evidence that an affected household will see consumption drop 7 percent within the first five years after the adult death. With high growth in the sample over this time period, this creates a 19 percentage point growth gap with the average household. There is some evidence of persistent effects of these shocks for up to 13 years, but these effects are imprecisely estimated and not significantly different from zero. The impact of female adult death is found to be particularly severe.
    Keywords: Population Policies,Consumption,Housing & Human Habitats,Poverty Lines,Inequality
    Date: 2006–12–01
  13. By: Victor Lavy (The World Bank and Hebrew University of Jerusalem); John Quigley (University of California, Berkeley)
    Abstract: This paper presents estimates of willingness to pay for medical care, including the quality and intensity of medical treatment sought in response to illness or injury. The empirical analysis is based on some 5000 observations on the behavior of low income households in Ghana in 1986. The results indicate that the decision to seek medical treatment is responsive to household income. Prices have significant but inelastic influences on the choice among types of treatment and the intensity of treatment sought. Availability of treatment has a substantial effect upon the types of treatment and the utilization of facilities. These results are robust to changes in the structure of the estimating model.
    Date: 2006–07–13
  14. By: James Heintz (Political Economy Research Institute, University of Massachusetts); Fabian Slonimczyk (Department of Economics, University of Massachusetts)
    Abstract: Using estimates of earnings functions in Ghana, this paper examines patterns of labor market segmentation with regard to formal and informal employment. Persistent earnings differentials are used as indicators of limited mobility across segments of the employed labor force. We find evidence of labor market segmentation between formal and informal employment and between different categories of informal employment which cannot be fully explained by human capital, physical asset, or credit market variables. We argue that dualist labor market models may not be appropriate for understanding employment dynamics in all circumstances and an approach that recognizes the multi-segmented character of labor markets may be preferable. JEL Categories: J21, J30, O17, O55.
    Keywords: dualism, labor markets, employment, segmentation, Ghana.
    Date: 2007–01
  15. By: Merwan H. Engineer (University of Victoria); Ming Kang; Eric Roth; Linda Welling
    Abstract: This paper makes five contributions to the modeling of societies organized primarily according to age. First, it models the social rules adhered to by a particular age-group society, the Rendille of Northern Kenya. Second, it shows that their age-group rules are well represented by the standard overlapping generations (OLG) model. Third, we develop a genealogical OLG model that closely captures lifecycle transitions and lineages. Fourth, despite heterogeneity in the timing of marriage and birthing, the model can be calibrated using aggregate data. Fifth, the model permits an analysis of institutions that reveals the intergenerational conflicts between the lineages in changing the social rules
    Keywords: Overlapping Generations Model, Age-Group Societies, Institutions, Political Economy
    JEL: J1 J12 O1
    Date: 2006–12–03
  16. By: Bogomolova, Tatiana; Impavido, Gregorio; Pallares-Miralles, Montserrat
    Abstract: This paper analyzes the future liabilities that the Ugandan Public Service Pensions Fund might accumulate under the provisions of the Pensions Act (CAP 286) unless it is reformed. It then discusses alternative reform options that can be used in designing an educated homegrown reform of the fund. The paper supports a hybrid (two-pillar) reform option composed of a small defined benefit scheme and a complementary defined contribution scheme, instead of a pure defined contribution (monopillar) reform option discussed by policymakers in the country. The main reason for this is related to the fact that hybrid and pure defined contribution reforms will have the same impact on reducing pension expenditure (for the same grandfathering rules and surplus in the first pillar). In addition, everything else being equal, the hybrid reform is likely to produce higher average replacement rates due to the redistributive and pooling properties of the small defined benefit pillar.
    Keywords: Pensions & Retirement Systems,Enterprise Development & Reform,Population Policies,State Owned Enterprise Reform,Labor Markets
    Date: 2006–12–01

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