nep-afr New Economics Papers
on Africa
Issue of 2008‒05‒10
seven papers chosen by
Suzanne McCoskey
George Washington University

  1. New Estimates of Capital Flight from Sub-Saharan African Countries: Linkages with External Borrowing and Policy Options By James Boyce; Léonce Ndikumana
  2. Vulnerability and Poverty Dynamics in Uganda, 1992-1999 By Kasirye, Ibrahim
  3. Foreign Presence, Spillovers, and Productivity: Evidence from Ghana By Waldkirch, Andreas; Ofosu, Andra
  4. Trade in the WAEMU: Developments and Reform Opportunities By Manuela Goretti; Hans Weisfeld
  5. Firm Productivity and Exports: Evidence from Ethiopian manufacturing By Bigsten, Arne; Gebreeyesus, Mulu
  6. Post-Conflict Recovery: Resource Mobilization and Peacebuilding By James Boyce
  7. Exchange Rate Assessment in a Resource - Dependent Economy: The Case of Botswana By Corinne Deléchat; Matthew Gaertner

  1. By: James Boyce; Léonce Ndikumana
    Abstract: Even as African countries became increasingly indebted from 1970 to 2004, they experienced large-scale capital flight. Some of this was legitimately acquired capital fleeing economic and political uncertainties; some was illegitimately acquired wealth spirited to safer havens abroad. This paper presents new estimates of the magnitude and timing of capital flight from 40 sub-Saharan African countries and analyzes its determinants, including linkages to external borrowing. Our results confirm that sub-Saharan <st1:place w:st="on">Africa</st1:place> is a <i>net creditor</i> to the rest of the world, in that the subcontinent’s private external assets exceed its public external liabilities: total capital flight amounted to $420 billion (in 2004 dollars), compared to the external debt of $227 billion. Econometric analysis indicates that for every dollar in external loans to <st1:place w:st="on">Africa</st1:place> in this period, roughly 60 cents flowed back out as capital flight in the same year, a finding that suggests the existence of widespread “debt-fueled” capital flight. The results also show a debt-overhang effect, as increases in the debt stock spur additional capital flight in later years. In addition to policies for recovery of looted wealth and repatriation of externally held assets, we discuss the need for policies to differentiate between legitimate and “odious” debts, both to ease current burdens and to improve international financial governance in the future.
    Keywords: capital flight; external indebtedness; stolen assets; odious debt
    JEL: F21 F33 F34 H26 O16 O24
    Date: 2008
  2. By: Kasirye, Ibrahim
    Abstract: This paper uses a panel data set of 1309 households in Uganda to measure vulnerability to poverty between 1992/93 and 1999/2000 and to estimate the impact of household characteristics on vulnerability. The likelihood of future poverty is estimated based on the expected mean and variance of household consumption. Education, spatial characteristics, and access to community infrastructure are found to have important impacts on vulnerability. Specifically, the reduction in vulnerability to poverty increases with higher education attainment of the household head. Also households resident in northern Uganda are about 60 percent more vulnerable compared to their counterparts in central Uganda. The study also finds that causes of vulnerability in Uganda are similar to causes of poverty and therefore policies to raise the earning capacity of poor households would help both vulnerability and poverty.
    Keywords: Vulnerability;Poverty Dynamics; Uganda
    JEL: I32
    Date: 2007–08–01
  3. By: Waldkirch, Andreas; Ofosu, Andra
    Abstract: This paper investigates the effect of foreign presence on the productivity of manufacturing industries in Ghana, using firm level panel data. We examine both labor and total factor productivity (TFP), which we compute using the Levinsohn and Petrin (2003) methodology. We control for a number of observed factors as well as unobserved heterogeneity in several dimensions. We find robust evidence that the presence of foreign firms in a sector has a negative effect on domestically owned, but a positive effect on most foreign owned firms. Unlike in recent work on China, it does not appear that the negative level effect is compensated for by a positive growth effect, at least not in any reasonable time period. This finding underscores that care must be exercised in extrapolating results from one country to others. We find no evidence of any wage effects.
    Keywords: Foreign Direct Investment; Productivity; Spillovers; Firm Level Data; Africa; Ghana
    JEL: O55 O24 F23
    Date: 2008–03
  4. By: Manuela Goretti; Hans Weisfeld
    Abstract: This paper provides an overview of trade reform in the West African Economic and Monetary Union (WAEMU) since 1996 and a quantitative assessment of potential effects on trade patterns and tariff revenue of the current reform agenda. Despite evidence of significant trade complementarities within WAEMU, implementation of the union's current trade regime still suffers from persistent non-tariff barriers and administrative weaknesses. Based on an assessment of prospects for further trade integration, the paper also recommends strengthening the implementation of the present tariff union and supports the plan to extend it to all ECOWAS members. Finally, the paper stresses that an Economic Partnership Agreement with the EU could bring to the region the political momentum needed to address the weaknesses of the current trade regime, while also underlining the corresponding challenges in terms of trade diversion and tariff revenue losses.
    Keywords: West African Economic and Monetary Union , Trade , Tariffs , Tax revenues ,
    Date: 2008–03–21
  5. By: Bigsten, Arne (Department of Economics, School of Business, Economics and Law, University of Gothenburg); Gebreeyesus, Mulu (Department of Economics, School of Business, Economics and Law, University of Gothenburg)
    Abstract: This paper examines the causal relationship between exporting and productivity using a ten years long plant-level panel data set from an annual census of Ethiopian manufacturing, rarely available in the sub-Saharan Africa. We exploited its length to trace the trajectory of TFP and other productivity measures of groups of firms classified by their export history. We then tested learning-by-exporting using a one-step system-GMM approach with the export-status included directly in the production function. We addressed potential endogeneity problems by using instrumental variables, and also applied a matching analysis to address potential selection bias. We found strong evidence of not only self-selection but also learning-by-exporting. Depending on the specification previous exporting appears to have shifted the production function by 15-32 %. Exporters had on average three times more employees, and paid 1.6 times higher average wage than those of non-exporters.<p>
    Keywords: Productivity; exports; Ethiopia; manufacturing
    JEL: D21 F14 L60 O14
    Date: 2008–04–30
  6. By: James Boyce
    Abstract: <p class="MsoNormal">Societies embarked on the fragile transition from war to peace face enormous economic, social, and political challenges. In attempting to support this transition, the international community often provides substantial amounts of external assistance. This aid can play an important and constructive role in meeting pressing social needs and building a durable peace, but it would be naïve to assume either that positive effects are the automatic result of good intentions or that donors are motivated entirely by the objective of peacebuilding. This paper reviews evidence on the impact of aid in “post-conflict” settings and offers suggestions for making aid more effective in supporting efforts to build a durable peace. Part I discusses how economic assistance and conditionalities can be realigned to better serve peacebuilding objectives. Part II considers the other side of the coin: how peacekeeping operations and peacebuilding assistance can better support economic recovery, in particular by helping to build state fiscal capacities. Finally, Part III examines the interests and incentive structures that shape the behavior of aid donors, suggesting that their actions can be part of the problem as well as part of the solution.</p><span style="font-size: 12pt; font-family: "Times New Roman";"></span>
    Keywords: Peacebuilding; post-conflict reconstruction; conditionality; revenue mobilization;horizontal equity; polarization; foreign aid.
    JEL: F35 F53 H2 O19 O23
    Date: 2008
  7. By: Corinne Deléchat; Matthew Gaertner
    Abstract: The paper combines various methodologies to assessing the level of the exchange rate in Botswana, explicitly taking into account the implications of its dependency on diamond exports. Real exchange rate estimation indicates that, after a period of overvaluation, Botswana's real effective exchange rate is now broadly in line with economic fundamentals. The projected current account path is also consistent with external sustainability, defined to ensure sufficient savings of diamond wealth in order to maintain a stable import and consumption path through 2050. Sustaining consumption over the longer term will however require to address obstacles to non-diamond exports' competitiveness.
    Date: 2008–04–01

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