nep-afr New Economics Papers
on Africa
Issue of 2007‒08‒18
eleven papers chosen by
Suzanne McCoskey
George Washington University

  1. Privatising Basic Utilities in Sub-Saharan Africa: The MDG Impact By Kate Bayliss; Terry McKinley
  2. A fiscal rule to produce counter-cyclical fiscal policy in South Africa By Stan du Plessis; Willem H. Boshoff
  3. Malaria: Disease Impacts and Long-Run Income Differences By Douglas Gollin; Christian Zimmermann
  4. Infrastructure in South Africa: Who is to finance and who is to pay? By Estian Calitz; Johan Fourie
  5. Price elasticity and other forces shaping cigarette demand in South Africa over 1996-2006 By Willem H. Boshoff
  6. The Macroeconomic Debate on Scaling up HIV/AIDS Financing By Terry McKinley; Degol Hailu
  7. Brain Drain or Brain Gain? Micro Evidence from an African Success Story By Catia Batista; Aitor Lacuesta; Pedro C. Vicente
  8. Remittances as insurance for idiosyncratic and covariate shocks in Malawi: The importance of distance and relationship By Davies, Simon
  9. What we do and don’t know about trade liberalization and poverty reduction By Rob Vos
  10. Adjustment Options and Strategies in the Context of Agricultural Policy Reform and Trade Liberalisation By Osamu Kubota
  11. The network structure of informal arrangements : evidence from rural Tanzania By COMOLA Margherita

  1. By: Kate Bayliss (Independent Consultant, Brighton, United Kingdom); Terry McKinley (International Poverty Centre)
    Keywords: MDG; Sub-Saharan Africa
    Date: 2007–01
  2. By: Stan du Plessis (Department of Economics, Stellenbosch University); Willem H. Boshoff (Department of Economics, Stellenbosch University)
    Abstract: This paper considers the role of fiscal policy as a component of stabilisation policy in South Africa. The South African economy – like many others, most notably the United States – has experienced considerable economic stability over the last decade. At stake in this paper is whether fiscal policy had intentionally or unintentionally contributed to this favourable outcome. A number of techniques are used to investigate the cyclicality of fiscal outcomes since the early 1990s in South Africa and the evidence does not support claims that South African fiscal policy had been pro-cyclical (and hence destabilising) overt this period. But to prevent potential fiscal pro-cyclicality from becoming a reality in South Africa a package of reforms is derived that is consistent with the empirical evidence presented. The recommended reform includes: firstly, a fiscal rule that includes the following features: a numerical limit on the ratio of government expenditure to GDP and a commitment to a balanced budget (adjusted for the economic cycle), which would allow automatic revenue stabilisers to ensure a counter-cyclical policy. Secondly, a procedural rule that requires an independent business cycle commission to calculate potential GDP, the output gap and the adjustments required to calculate the structural budget balance. This depoliticised commission will enhance fiscal transparency and prevent the temptation by fiscal authorities to adjust these estimates, which have undermined some fiscal rules in practice.
    Keywords: Fiscal policy, Stabilisation policy, Structural budget balance, Fiscal stance, Fiscal rules
    JEL: E32 E61 E62 E63
    Date: 2007
  3. By: Douglas Gollin (Williams College); Christian Zimmermann (University of Connecticut)
    Abstract: The World Health Organization (WHO) reports that malaria, a parasitic disease transmitted by mosquitoes, causes over 300 million episodes of "acute illness" and more than one million deaths annually. Most of the deaths occur in poor countries of the tropics, and especially sub-Saharan Africa. Some researchers have suggested that ecological differences associated with malaria prevalence are perhaps the most important reason why some countries today are rich and others poor. This paper explores the question in an explicit dynamic general equilibrium framework, using a calibrated model that incorporates epidemiological features into a standard general equilibrium framework.
    Keywords: Malaria, Epidemiology, GDP, Disease prevention, Sub-Saharan Africa.
    JEL: I1 O11 E13 E21
    Date: 2007–08
  4. By: Estian Calitz (Department of Economics, Stellenbosch University); Johan Fourie (Department of Economics, Stellenbosch University)
    Abstract: Against the backdrop of shifting views on the role of government in the provision of infrastructure, this paper distinguishes between the payment for and financing of the South African Government’s infrastructure investment programme. The paper also presents a classification system that enables a systematic mapping of all prospective projects, with reference to considerations of efficiency and equity. This mapping should assist in macro planning and in any analysis of the financial implications of project financing and cost recovery at all levels of government. The government’s financing strategy is questioned and alternatives are identified. The prospects for mobilising funds other than tax revenue are assessed, namely government loans, private equity, development finance and donor funds. Four investment projects are considered with a view to testing the classification system and evaluating the chosen financing options in terms of economic criteria.
    Keywords: Infrastructure financing, government loans, benefit taxation, guarantees, private-public partnerships, South Africa
    JEL: H54 H81 H72
    Date: 2007
  5. By: Willem H. Boshoff (Department of Economics, Stellenbosch University)
    Abstract: The study seeks to re-investigate the price elasticity of South African cigarette demand over the period 1996 to 2006. At first glance, rising cigarette prices seem to have played an important role in reducing cigarette consumption over the sample period, especially during the late nineties. But how dependent is the impact of price increases on general economic conditions and overall health awareness among smokers? Health awareness, in particular, has not received sufficient attention in the South African context, due to a lack of data. Furthermore, previous estimates of price and income elasticity of cigarette demand are based on long annual time series data, which do not allow for changes in underlying tastes and preferences. The paper attempts to disentangle the forces of price, income, health awareness and policy intervention using a quarterly dataset. However, the study also cautions against the upward bias in estimates derived from formal cigarette sales data – in the light of increasing illicit cigarette volumes in South Africa.
    Keywords: Price elasticity, Tobacco control, Cigarettes, Illicit cigarettes, Excise duties, Health awareness
    JEL: D12 H21 I18 C40
    Date: 2007
  6. By: Terry McKinley (International Poverty Centre); Degol Hailu (UNDP SURF)
    Keywords: Poverty, ECONOMIC, Macroeconomic, HIV, AIDS
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–09
  7. By: Catia Batista; Aitor Lacuesta; Pedro C. Vicente
    Abstract: Does emigration really drain human capital accumulation in origin countries? This paper explores a unique household survey designed and conducted to answer this specific question for the case of Cape Verde - the sub-Saharan African country with the largest fraction of tertiary-educated population living abroad, despite also having a fast-growing stock of human capital. Unlike previous literature, the ideal characteristics of our tailored survey allow us to explicitly test "brain gain" arguments according to which the possibility of own future emigration positvely contributes to educational attainment in the origin country. In particular, we introduce a new method to estimate this effect by using full histories of current and return migrants (which enable controlling for migrant selection on unobservables), and a new set of exclusion restrictions both at the regional and household levels. Our results are robust to the inclusion of controls for remittances, family disruption, and general equilibrium effects of emigration. In constructing a counterfactual distribution of skills to answer our research question, we combine the survey data with information from censuses of the destination cuntries to account for the characteristics of the labour force that is (permanent and temporarily) lost due to emigration. Our results point to commonly used "brain dran" figures to be significantly exaggerated, whereas there may be substantial "brain gains" from allowing free migration and encouraging return migration.
    Keywords: Brain Drain, Brain Gain, International Migration, Human Capital, Effects of Emigration in Origin Countries, Household Survey, Cape Verde, Sub-Saharan Africa
    JEL: F22 J24 O15 O55
    Date: 2007
  8. By: Davies, Simon
    Abstract: This paper uses Malawian panel data to show the importance of geography and family relationships when studying remittances. We do not test any hypothesis as such, but instead demonstrate the significance of the source of remittances in testing hypotheses. When remittances are viewed from an insurance perspective, geography matters. Covariate (community) shocks tend to be insured further from home than idiosyncratic ones. When viewed from a motivational perspective, family relationship and culture matter. Furthermore, gift exchange amongst unrelated households can be as important as remittance flows amongst members of the same family in insuring shocks. Inter-household remittances are closely linked to social networks, with business and religious groups being particularly important (perhaps due to trust). Remittance flows are often reciprocal – receiving households often being the main senders, emphasizing their insurance nature.
    Keywords: Remittances; Insurance; Household Economics; Malawi; Africa
    JEL: O18 D19 D31
    Date: 2007–07
  9. By: Rob Vos
    Abstract: Strong opinions about the impact of globalization on poverty are not always backed by robust factual evidence. As argued in this paper, however, it is not all that easy to lay our hands on ‘robust’ facts. Quantitative analyses of trade liberalization appear highly sensitive to basic modelling and parameter assumptions. Altering these could turn the expectation that, for instance, Africa’s poor stand to gain from further trade opening under the Doha Round into one in which they would stand to lose. Most studies agree though that trade opening probably adds to aggregate welfare, but gains are small and unevenly distributed.
    Keywords: computable general equilibrium models, trade policy, economic integration, trade and labour market interactions, welfare and poverty, international linkages to development, foreign exchange policy
    JEL: C68 F13 F15 F16 I3 O19 O24
    Date: 2007–08
  10. By: Osamu Kubota
    Abstract: Reforming agricultural policies by reducing distorting support improves economic efficiency as a whole through a better allocation of resources. This implies that adjustment may have adverse effects on some agricultural households and other people engaged in the sector, in particular in the short term. There may also be negative impacts on upstream and downstream sectors and on regional economies that rely on commodities whose prices and production levels fall with reductions in support and protection. Despite pressures to reform to meet multilateral and bilateral trade commitments and to respond to budgetary constraints, these adverse impacts are a major reason why governments find it difficult to make progress in policy reform.
    Date: 2007–08
  11. By: COMOLA Margherita
    Abstract: In developing countries, whenever formal economic and financial institutions lack strength, households are forced to rely on risk sharing and other informal arrangements based on pre-existing interpersonal relationships. This paper takes a network perspective to investigate how rural households form the links through which they provide and/or get economic support, and whether the connection structure of the community affects the formation of these links. I test the hypothesis that indirect contacts matter, that is, agents take into account not only potential partners’ characteristics, but also their position with respect to all other agents. A network formation framework with fully heterogeneous agents is first presented, following Jackson and Wolinsky (1996), an estimation procedure is then proposed and applied to data on a village in rural Tanzania. Results show that when agents evaluate the net advantage of forming a link they also consider the relative position and the wealth of indirect partners. My paper contributes to both network theory and the literature on risk sharing arrangements in that it proposes an innovative procedure to estimate endogenous network formation models, and provides evidence that network structure has an explanatory value disregarded by all previous studies, which are focused on direct relations only.
    Keywords: households, risk sharing arrangements, network structure, Tanzania.
    JEL: O15
    Date: 2007–05

This nep-afr issue is ©2007 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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