nep-afr New Economics Papers
on Africa
Issue of 2007‒11‒24
eighteen papers chosen by
Suzanne McCoskey
George Washington University

  1. The Euro, a blessing for Africa? Consequences of the peg of the African Franc CFA to the Euro By Kohnert, Dirk
  2. Patterns of long term growth in Sub-Saharan Africa By Page, John; Arbache, Jorge Saba
  3. Is There An Informal Employment Wage Penalty? Evidence from South Africa By Eliane Badaoui; Eric Strobl; Frank Walsh
  4. More growth or fewer collapses ? a new look at long run growth in Sub-Saharan Africa By Page, John; Arbache, Jorge Saba
  5. Determinants of South African Women’s Labour Force Participation, 1995-2004 By Miracle Ntuli
  6. ESTIMATING THE TOURISM POTENTIAL IN NAMIBIA By Eita, Joel Hinaunye; Jordaan, Andre C.
  7. The incidence of graft on developing-country firms By E. Valladares, Elio; Ernesto Lopez-Cordova, J.; Gonzalez, Alvaro
  8. Growth, Democracy, and Civil War By Bruckner, Markus; Ciccone, Antonio
  9. The Impact of Foreign Aid on Government Spending, Revenue and Domestic Borrowing in Ethiopia By Pedro M. G. Martins
  10. Forecasting the South African Economy: A DSGE-VAR Approach By Samrat Goswami; Rangan Gupta; Eric Scaling
  11. The Role of the Natural Resource Curse in Preventing Development in Politically Unstable Countries: Case Studies of Angola and Bolivia By Saraly Andrade; Joaquin Morales
  12. The Formal Sector Wage Premium and Firm Size By Eliane Badaoui; Eric Strobl; Frank Walsh
  13. Help or hindrance ? the impact of harmonized standards on african exports By Wilson, John S.; Shepherd, Ben; Czubala, Witold
  14. Are NGOs the Better Donors? A Case Study of Aid Allocation for Sweden By Axel Dreher; Florian Mölders; Peter Nunnenkamp
  15. Working for God? Evidence form a Change in Financing of not-for-profit Health Care Providers in Uganda By Reinikka, Ritva; Svensson, Jakob
  16. Aid Volatility, Policy and Development By John Hudson; Paul Mosley
  17. Challenges to MDG achievement in low income countries : lessons from Ghana and Honduras By Medvedev, Denis; Bussolo, Maurizio
  18. Poverty dynamics in rural Madagascar: regularities and specificities at the regional level\r\n (In French) By Claire GONDARD-DELCROIX (GREThA)

  1. By: Kohnert, Dirk
    Abstract: About five decades the Franc CFA-Zone in Western and Central Africa was praised as incarnation of economic and political stability in Africa, backed by France. But free convertibility and fixed parity, guaranteed by the French Treasury, mainly served the interest of a small elite of the Messieurs Afrique, both in France and in Africa. Generations of French entrepreneurs and of their African counterparts maintained a profitable self-service shop on expense of the African poor and the French taxpayer. In the aftermath of the devaluation of the Franc CFA in 1994, and of the peg of the currency to the Euro in 1998, the socio-economic divide between rich and poor, urban and rural regions, the formal and the informal sector even widened. However, the perpetuation of the established monetary structure of the CFA-Zone became increasingly anachronistic. As far as the political stability, previously guaranteed by the neo-colonial French Africa policy, becomes obsolete, the base for economic stability of the traditional arrangement of the currency union is threatened as well. The more so, as the CFA-Zone never fulfilled the most crucial preconditions of an optimal currency area. The peg to the EMU, orientated at the interests of highly industrialized European countries, led to an overvaluation of the real exchange rate of the CFA, and will increasingly constitute an obstacle to sustainable indigenous development in francophone Africa.
    Keywords: Monetary Union; regional integration; Optimum Currency Areas; Franc CFA-Zone; Francophone Africa; Euro; EMU
    JEL: F15 F35 E42 E52 F33 F31 F54 F36
    Date: 1998
  2. By: Page, John; Arbache, Jorge Saba
    Abstract: Using the most recent purchasing power parity data for 44 sub-Saharan African countries, this paper examines the characteristics of long run growth in Africa between 1975 and 2005. The authors investigate the following issues: cross-country income structure, income convergence, the country level distribution of income, growth and income persistence, and formation of convergence clubs.
    Keywords: Economic Conditions and Volatility,Economic Theory & Research,Achieving Shared Growth,Economic Growth,Inequality
    Date: 2007–11–01
  3. By: Eliane Badaoui (THEMA, Université de Cergy-Pontoise); Eric Strobl (Ecole Polytechnique Paris and IZA); Frank Walsh (University College Dublin)
    Abstract: We estimate the wage penalty associated with working in the South African informal sector. To this end we use a rich data set on non-self employed males that allows one to accurately distinguish workers employed in the informal sector from those employed in the formal sector and link individuals over time. Implementing various econometric approaches we find that there is a gross wage penalty of a little over 18 per cent for working in the informal sector. However, once we reduce our sample to a group for which we can reasonably calculate earnings net of taxes and control for time invariant unobservables the wage penalty disappears.
    Keywords: informal sector, wage penalty, South Africa
    JEL: J31 O17
    Date: 2007–11
  4. By: Page, John; Arbache, Jorge Saba
    Abstract: Low and highly volatile growth define Africa ' s growth experience. But there is no evidence that growth volatility is associated to long term economic performance. This result may be misleading if it suggests that volatility is not important for economic and social progress. In this paper we use a variant of the method developed by Hausmann, Pritchett, and Rodrik (2005) to identify both growth acceleration and deceleration episodes in Africa between 1975 and 2005. The authors find that Africa has had numerous growth acceleration episodes in the last 30 years, but also nearly a comparable number of growth collapses, offsetting most of the benefits of growth. Had Africa avoided its growth collapses, it would have grown 1.7 percent a year instead of 0.7 percent, and its GDP per capita would have been more than 30 percent higher in 2005. The authors also find that growth accelerations and decelerations have an asymmetric impact on human development outcomes. Finally, our results suggest that it is easier to identify the likely institutional and policy origins of growth decelerations than of growth accelerations.
    Keywords: Governance Indicators,Achieving Shared Growth,Economic Conditions and Volatility,Economic Growth,Nutrition
    Date: 2007–11–01
  5. By: Miracle Ntuli (University of Cape Town and IZA)
    Abstract: A striking feature of labour supply in South Africa is the phenomenal expansion in the labour force participation of women from 38 percent in 1995 to 46 percent in 2004. Even so, their participation has been persistently lower than that of men whose participation rates were 58 percent and 62 percent respectively. Furthermore, analyses of women’s participation rates by race show that the rates for historically disadvantaged groups such as Africans are still lower than those of Whites. For instance, in 1995 African women had a participation rate of 34 percent and it increased to 43 percent in 2004 while the corresponding rates for White women were 52 percent and 59 percent. In light of these disparities, this paper uses survey data to examine the determinants of the low level and also of the changes in African women’s labour force participation, during the first decade of democracy (1995-2004). By focussing on a ten year period, this research substantially differs from earlier studies which were preoccupied with short periods such as one year. A longer period is analytically advantageous because it allows the capturing of the changes and the robustness of the key determinants of female labour force participation in South Africa. Such information is important not only for reviewing existing policies but also for the formulation of new ones to increase female labour force participation which is a prerequisite for economic development. The study utilises a decomposition technique devised by Even and Macpherson (1990). The findings exhibit that female participation responded positively to education which has been the prime factor. Non-labour income, marriage, fertility and geographical variations in economic development persistently stifled participation. It is argued that the perceived change in participation is due to emigration and changes in human capital and financial endowments. Another important discovery is that -9 percent of the observed shifts in the participation rates from 1995-2004 is due to disparities in characteristics while differences in coefficients account for 109 percent of the shifts.
    Keywords: feminisation, labour force, decomposition analysis
    JEL: J21 J22 J16
    Date: 2007–10
  6. By: Eita, Joel Hinaunye; Jordaan, Andre C.
    Abstract: This paper investigates the determinants of tourism in Namibia for the period 1996 to 2005. The results indicate that an increase in trading partners’ income, depreciation of the exchange rate, improvement in Namibia’s infrastructure, sharing a border with Namibia are associated with an increase in tourist arrivals. The results show that there is unexploited tourism potential from Angola, Austria, Botswana, Germany, South Africa and the United States of America. This suggests that it is important to exploit the tourism potential as this would help to accelerate economic growth and generate the much needed employment.
    JEL: C50 F17 C23 C59 C33
    Date: 2007–10–15
  7. By: E. Valladares, Elio; Ernesto Lopez-Cordova, J.; Gonzalez, Alvaro
    Abstract: This pap er measures the extent to which firms in developing countries are the target of bribes. Using new firm-level survey data from 33 African and Latin American countries, we first show that perceptions adjust slowly to firms ' experience with corrupt officials and hence are an imperfect proxy for the true incidence of graft. We then construct an experience-based index that reflects the probability that a firm will be asked for a bribe in order to complete a specified set of business transactions. On average, African firms are three times as likely to be asked for bribes as are firms in Latin America, although there is substantial variation within each region. Last, we show that graft appears to be more prevalent in countries with excessive regulation and where democracy is weak. In particular, our results suggest that the incidence of graft in Africa would fall by approximately 85 percent if countries in the region had levels of democracy and regulation similar to those that exist in Latin America.
    Keywords: Public Sector Corruption & Anticorruption Measures,Corruption & Anitcorruption Law,Crime and Society,E-Business,Access to Finance
    Date: 2007–11–01
  8. By: Bruckner, Markus; Ciccone, Antonio
    Abstract: Are civil wars partly caused by low economic growth? And do democratic institutions attenuate the impact of low growth on the likelihood of civil war? Our approach to answering these questions exploits that international commodity prices have a significant effect on income growth in Sub-Saharan African countries. We show that lower income growth makes civil war more likely in non-democracies. This effect is significantly weaker in democracies. So much so, that we do not find a link between growth and civil war in countries with democratic institutions. Our results therefore point to an interaction between economic and institutional causes of civil war.
    Keywords: civil war; Commodity prices; growth; rainfall
    JEL: O0 P0 Q0
    Date: 2007–11
  9. By: Pedro M. G. Martins (Visiting IPC Researcher, Institute for Development Studies, Sussex)
    Abstract: The main aim of this Working Paper is to assess the impact of foreign aid inflows on public expenditure, revenue and domestic borrowing in Ethiopia. The paper provides a literature overview of the fiscal effects of aid, and then applies a fiscal response model to Ethiopian data for the period 1964-2005. Since the empirical literature finds little evidence of common cross-country patterns, this highlights the important role that country-specific circumstances play in determining fiscal outcomes. By studying the particular fiscal dynamics in Ethiopia, the paper finds that foreign aid has had a positive impact on government investment, while its effect on current expenditure has been less pronounced. Moreover, by disaggregating aid inflows into grants and foreign lending, the paper is able to analyse their specific roles and impacts. The results support the conclusion that aid inflows increase public investment, with loans having a stronger impact than grants. Both aid grants and loans have a strong negative effect on domestic borrowing, suggesting that aid and domestic financing are close substitutes. Finally, the results also appear to support the hypothesis that higher aid flows displace domestic revenues. However, this particular finding does not seem to be robust across the sample.
    Keywords: Foreign Aid, Aid Effectiveness, Fiscal Response Literature, Ethiopia
    JEL: C51 F35 H30
    Date: 2007–11
  10. By: Samrat Goswami (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria); Eric Scaling (Department of Economics, University of Pretoria)
    Abstract: This paper develops an estimable hybrid model that combines the theoretical rigor of a micro-founded DSGE model with the flexibility of an atheoretical VAR model. The model is estimated via maximum likelihood technique based on quarterly data on real Gross National Product (GNP), consumption, investment and hours worked, for the South African economy, over the period of 1970:1 to 2000:4. Based on a recursive estimation using the Kalman filter algorithm, the out-of-sample forecasts from the hybrid model are then compared with the forecasts generated from the Classical and Bayesian variants of the VAR for the period 2001:1-2005:4. The results indicate that, in general, the estimated hybrid DSGE model outperforms the Classical VAR, but not the Bayesian VARs in terms of out-of-sample forecasting performances.
    Keywords: DSGE Model, VAR and BVAR Model, New-Keynesian-Macroeconomic Model, Forecast Accuracy, DSGE Forecasts, VAR Forecasts, BVAR Forecasts.
    JEL: E17 E27 E32 E37 E47
    Date: 2007–07
  11. By: Saraly Andrade (Toulouse School of Economics); Joaquin Morales (Institute for Advanced Development Studies, Bolivia)
    Abstract: For about three decades now, development economics researchers have consistently claimed that third world resource-rich countries were not developing as well and/or as fast as they were expected to, given that their natural resources endowment was considered a great opportunity for development. The phenomenon of underperformances concerning primary commodity exporters relative to non resource-rich countries has been often referred to as to the “Natural Resource Curse”. The authors use an historical and political approach to the manifestations of the curse in the specific cases of Angola and Bolivia, both resource abundant countries, but suffering among the lowest development standards in their respective continents. In chapter one, the authors make a quick review of the literature explaining both causes and manifestations of the Resource Curse. The authors go beyond the classical Dutch Disease explanations and show how natural resources lead to behaviours of looting, rent-seeking and civil confrontations. In chapter two, the authors present the framework where they adjust the “African Anti-growth Policy Syndromes” described by Paul Collier to the specific case of the Natural Resource curse. In addition, they add some considerations of the negative effect of natural resource extraction by analysing externalities on environment, education and inequalities. Chapters three and four analyse the case studies of Angola and Bolivia respectively, emphasizing the role of historical context explaining policy behaviour and the critical impact of unexpected windfalls and sudden price collapses. The authors find that natural resources could sustain long lasting conflicts, but that conditions of fractionalization of society determine the possibility of conflict. A country divided in two rigid political factions is more prone to internal conflict, like in Angola, whether in countries where frontiers between blocks are blurried or the country is multi-polar, like in Bolivia, the risks of long-lasting civil war seem less important. Apart from conflict, the authors show that lack of institutions and inequality make of natural resources a source of political instability that has far more impact on economic performances than other factors.
    Keywords: Natural Resource curse, Rent-seeking, Civil War, Angola, Bolivia
    JEL: N2 N5 O1
    Date: 2007–11
  12. By: Eliane Badaoui (THEMA, Université de Cergy-Pontoise); Eric Strobl (Ecole Polytechnique Paris and IZA); Frank Walsh (University College Dublin)
    Abstract: We show theoretically that when larger firms pay higher wages and are more likely to be caught defaulting on labour taxes, then large high-wage firms will be in the formal sector and small low-wage firms will be in the informal sector. The formal sector wage premium is thus just a firm size wage differential. Using data from the South African labour force survey we illustrate that firm size is indeed the key variable determining whether a formal sector premium exists.
    Keywords: informal sector, wage premium, firm size
    JEL: J42
    Date: 2007–11
  13. By: Wilson, John S.; Shepherd, Ben; Czubala, Witold
    Abstract: The authors test the hypothesis that product standards harmonized to de facto international standards are less trade restrictive than ones that are not. To do this, the authors construct a new da tabase of European Union (EU) product standards. The authors identify standards that are aligned with ISO standards (as a proxy for de facto international norms). The authors use a sample-selection gravity model to examine the impact of EU standards on African textiles and clothing exports, a sector of particular development interest. The authors find robust evidence that non-harmonized standards reduce African exports of these products. EU standards which are harmonized to ISO standards are less trade restricting. Our results suggest that efforts to promote African exports of manufactures may need to be complemented by measures to reduce the cost impacts of product standards, including international harmonization. In addition, efforts to harmonize national standards with international norms, including through the World Trade Organization Technical Barriers to Trade Agreement, promise concrete benefits through trade expansion.
    Keywords: Information Security & Privacy,Standards and Technical Regulations,Science Education,Scientific Research & Science Parks,Information and Records Management
    Date: 2007–11–01
  14. By: Axel Dreher (KOF Swiss Economic Institute, ETH Zurich); Florian Mölders; Peter Nunnenkamp (The Kiel Institute for the World Economy, Kiel, Germany)
    Abstract: This paper analyzes whether and to what extent non-governmental organizations (NGOs) outperform official donors by allocating aid in a way that renders effective poverty alleviation more likely. We employ Probit and Tobit models and make use of an exceptionally detailed database that allows an assessment of the allocation of Swedish NGO aid in comparison to the allocation of Swedish official aid. Our results show that NGOs are more selective when deciding about which countries to enter at all. Moreover, in contrast to NGO aid, there is some evidence that political and commercial motives matter for the selection of ODA recipients. However, the Swedish case also supports the skeptical view according to which NGOs are unlikely to outperform official donors by providing better targeted aid when it comes to the allocation across recipients having passed the eligibility test.
    Keywords: Aid allocation, NGO aid, ODA, Sector-specific aid
    JEL: F35 O11 O19
    Date: 2007–11
  15. By: Reinikka, Ritva (World Bank); Svensson, Jakob (Institute for International Economic Studies, Stockholm University)
    Abstract: What motivates religious not-for-profit health care providers? This paper uses a change in financing of not-for-profit health care providers in Uganda to test two theories of organizational behavior. We show that financial aid leads to more laboratory testing, lower user charges, and increased utilization. These findings are consistent with the view that religious not-for-profit providers are intrinsically motivated to serve (poor) people and that these preferences matter quantitatively.
    Keywords: not-for-profit organizations; health care provision; organizational behavior; Uganda
    JEL: I10 L31 O12
    Date: 2007–11–14
  16. By: John Hudson; Paul Mosley (Department of Economics, The University of Sheffield)
    Keywords: aid volatility, disasters, trust
    JEL: O16
    Date: 2007–10
  17. By: Medvedev, Denis; Bussolo, Maurizio
    Abstract: This paper summarizes the policy lessons from applications of the Maquette for MDG Simulations (MAMS) model to two low income countries: Ghana and Honduras. Results show that costs of MDGs achievement could reach 10-13 percent of GDP by 2015, although, given the observed low productivity in the provision of social services, significant savings may be realized by improving efficiency. Sources of financing also matter: foreign aid inflows can reduce international competitiveness through real exchange appreciation, while domestic financing can crowd out the private sector and slow poverty reduction. Spending a large share of a fixed budget on growth-enhancing infrastructure may mean sacrificing some human development, even if higher growth is usually associated with lower costs of social services. The pursuit of MDGs increases demand for skills: while this encourages higher educational attainments, in the short term this could lead to increased income inequality and a lower poverty elasticity of growth.
    Keywords: Population Policies,,Achieving Shared Growth,Public Sector Economics & Finance,Public Sector Expenditure Analysis & Management
    Date: 2007–11–01
    Abstract: Poverty is a temporal phenomenon and its evolutions have to be studied. Nevertheless, it is overall important to understand the working process which explains trajectories of poverty, at both levels of households and regional under-groups. Carrying out an applied study on rural Madagascar, the article shows that poverty dynamics can not be properly understood without a territorial approach.
    Keywords: Chronic poverty, transitory poverty, regional dynamics, rural Madagascar
    JEL: I3 R11
    Date: 2007

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