nep-afr New Economics Papers
on Africa
Issue of 2008‒09‒29
fifteen papers chosen by
Marco Novarese
University Amedeo Avogadro

  1. Measuring the Vulnerability of Subnational Regions By Naude, Wim; McGillivray, Mark; Rossouw, Stephanie
  2. Nonlinearities in real exchange rate determination: do African exchange rates follow a radom walk? By Juan Carlos Cuestas; Estefania Mourelle
  3. Can the West Save Africa? By William Easterly
  4. Uncovering the Effect of the HIV Epidemic on Fertility in Sub-Saharan Africa: The Case of Malawi By Durevall, Dick; Lindskog, Annika
  5. How will climate change shift agro-ecological zones and impact African agriculture ? By Kurukulasuriya, Pradeep; Mendelsohn, Robert
  6. Measuring the Welfare Cost of Inflation in South Africa: A Reconsideration By Rangan Gupta; Josine Uwilingiye
  7. Clothing Export from sub-Saharan Africa : Impact on Poverty and Potential for Growth By Fukunishi, Takahiro
  8. Hunting for Leopards : long run country income dynamics in Africa By Arbache, Jorge Saba; Page, John
  9. Horticulture Exports, Agro-industrialization and Farm-nonfarm Linkages with the Smallholder Farm Sector: Evidence from Senegal By Miet Maertens
  10. Institutions and labormarket outcomes in Sub-Saharan Africa By Fox, Louise; Oviedo, Ana Maria
  11. Export Productivity and Specialization in China, Brazil, India and South Africa By Santos-Paulino, Amelia U.
  12. Foreign Direct Investment from China, India and South Africa in Sub-Saharan Africa: A New or Old Phenomenon? By Henley, John; Kratzsch, Stefan; Kulur, Mithat; Tandogan, Tamer
  13. Structural Transformation in Developed and Developing Countries By Bah, El-hadj M.
  14. Learning from the economics of networks to enhance poverty alleviation in African cotton zones By Michel Fok
  15. Trade costs in Africa : barriers and opportunities for reform By Portugal-Perez, Alberto; Wilson, John S.

  1. By: Naude, Wim; McGillivray, Mark; Rossouw, Stephanie
    Abstract: A small but growing literature has been concerned about the economic (and environmental) vulnerability on the level of countries. Less attention is paid to the economic vulnerability of different regions within countries. By focusing on the vulnerability of subnational regions, our paper contributes to the small literature on the ?vulnerability of place?. We see the vulnerability of place as being due to vulnerability in various domains, such as economic vulnerability, vulnerability of environment, and governance, demographic and health fragilities. We use a subnational dataset on 354 magisterial districts from South Africa, recognize the potential relevance of measuring vulnerability on a subnational level, and construct a local vulnerability index (LVI) for the various districts. We condition this index on district per capita income and term this a vulnerability intervention index (VII) interpreting this as an indicator of where higher income per capita, often seen in the literature as a measure of resilience, will in itself be unlikely to reduce vulnerability.
    Keywords: vulnerability, regional development, decentralization, South Africa
    Date: 2008
  2. By: Juan Carlos Cuestas; Estefania Mourelle
    Abstract: In this paper we aim at modelling the long run behaviour of the Real Effective Exchange Rates (REER) for a pool of African countries. Not much attention has been paid to this group of countries, in particular, to the existence of nonlinearities in the long run path of such a variable. Controlling for two sources of nonlinearites, i.e. asymmetric adjustment to equilibrium and nonlinear deterministic trends allows us to gain some insight about the behaviour of the African REER. We find that these sources of nonlinearites help us to explain the apparent unit root behaviour found applying linear unit root tests for most of the countries.
    Keywords: PPP, Real Exchange Rates, Unit roots, Nonlinearities.
    JEL: C32 F15
    Date: 2008–07
  3. By: William Easterly
    Abstract: In the new millennium, the Western aid effort towards Africa has surged due to writings by well-known economists, a celebrity mass advocacy campaign, and decisions by Western leaders to make Africa a major foreign policy priority. This survey contrasts the predominant "transformational" approach (West saves Africa) to occasional swings to a "marginal" approach (West takes one small step at a time to help individual Africans). Evaluation of "one step at a time" initiatives is generally easier than that of transformational ones either through controlled experiments (although these have been much oversold) or simple case studies where it is easier to attribute outcomes to actions. We see two themes emerge from the literature survey: (1) escalation. As each successive Western transformational effort has yielded disappointing results, the response has been to try an even more ambitious effort. (2) the cycle of ideas. Rather than a progressive testing and discarding of failed ideas, we see a cycle in aid ideas in many areas in Africa, with ideas going out of fashion only to come back again later after some lapse long enough to forget the previous disappointing experience. Both escalation and cyclicality of ideas are symptomatic of the lack of learning that seems to be characteristic of the "transformational" approach. In contrast, the "marginal" approach has had some successes in improving the well-being of individual Africans, such as the dramatic fall in mortality.
    JEL: O1 O11 O12 O13 O15 O23 O24 O4 O55
    Date: 2008–09
  4. By: Durevall, Dick (Department of Economics, School of Business, Economics and Law, Göteborg University); Lindskog, Annika (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In many Sub-Saharan countries the HIV epidemic has spread to over 10% of the working-age population, and is likely to affect economically relevant behaviour. We evaluate the impact of the HIV/AIDS epidemic on the reproductive behaviour for women in Malawi, allowing for a heterogeneous response depending on age and prior number of births. HIV/AIDS increases the probability that a young woman would give birth to her first child, while it decreases the probability to give birth of older women or of young women who have already given birth. The resulting change in the distribution of fertility across age-groups is likely to be more demographically and economically important than changes in the total number of children a woman gives birth to.
    Keywords: HIV; Fertility; Malawi; Panel-data logit
    JEL: I19 J13 O12
    Date: 2008–09–16
  5. By: Kurukulasuriya, Pradeep; Mendelsohn, Robert
    Abstract: The study develops a new method to measure the impacts of climate change on agriculture called the Agro-Ecological Zone (AEZ) Model. A multinomial logit is estimated to predict the probability of each AEZ in each district. The average percentage of cropland and average crop net revenue are calculated for each AEZ. Then an estimate of the amount of cropland in Africa and where it is located is provided. Using current conditions, the model calculates baseline values of cropland and crop net revenue, and estimates the future impact of climate change using two scenarios-harsh and mild. Total cropland does not change much across the two climate scenarios. However, the predicted change in African crop revenue ranges from a loss of 14 percent in the mild climate scenario to 30 percent in the harsher climate scenario. The analysis reveals that the greatest harm from climate change is that it will shift farms from high to low productive AEZs. The approach not only identifies the aggregate impacts, but also indicates where the impacts occur across Africa. The central region of Africa is hurt the most, especially in the harsher climate scenario. The Agro-Ecological Zone Model is a promising new method for valuing the long-term impacts of climate change on agriculture.
    Keywords: Climate Change,Common Property Resource Development,Forestry,Crops&Crop Management Systems,Global Environment Facility
    Date: 2008–09–01
  6. By: Rangan Gupta (Department of Economics, University of Pretoria); Josine Uwilingiye (Department of Economics, University of Pretoria)
    Abstract: In this paper, using the Fisher and Seater (1993) long-horizon approach, we estimate the long-run equilibrium relationship between money balance as a ratio of income and the Treasury bill rate for South Africa over the period of 1965:02 to 2007:01, and, in turn, use the obtained estimates of the interest elasticity and the semi-elasticity to derive the welfare cost estimates of inflation, using both Bailey’s (1956) consumer surplus approach, as well, as Lucas’s (2000) compensating variation approach. When, the results are compared to welfare cost estimates obtained recently by Gupta and Uwilingiye (2008), using the same data set, but based on Johansen’s (1991, 1995) cointegration technique, the values are less by more than half in size than those obtained in the latter study, with the same being utmost ranging between 0.16 percent to 0.36 percent of GDP for the target-band of 3 percent to 6 percent of inflation. The paper, thus, highlights the fact that welfare cost estimates of inflation are sensitive to the methodology used to estimate the long-run equilibrium money demand relationships.
    Keywords: Long Horizon Regression, Money Demand, Welfare Cost of Inflation
    JEL: E31 E41 E52
    Date: 2008–06
  7. By: Fukunishi, Takahiro
    Abstract: Increases in clothing exports after 2000 signaled the first incidence of large-scale manufacturing exports from sub-Saharan Africa. Using firm-level information, this paper explores the potential of clothing exports for poverty reduction and further growth as seen in other low income countries. It shows that the garment exporting industries in Kenya and Madagascar have contributed poverty reduction in the short term by providing mass employment for female and less educated workers with wages beyond the poverty line. However, the long-term impact is not certain. High production costs and limited development of local firms weaken potential for further growth in the competitive world market. Upgrading of the market and improvement of efficiency are required to remain competitive for African industries, and governmental support for local participation are needed to facilitate technology transfer.
    Keywords: Manufacturing exports, Poverty reduction, FDI spillover, Productivity, Textile industry, Africa
    JEL: D24 F21 J31 O33
    Date: 2008–07
  8. By: Arbache, Jorge Saba; Page, John
    Abstract: This paper examines the country-level dynamics of long-run growth in Africa between 1975 and 2005. The authors examine how growth has affected mobility and the distribution of income among countries. They analyze changes in cross-country income structure and convergence, and look for evidence of the formation of country groups or"clubs."Using a novel method of breaking up the growth histories of African economies into medium-term spells of growth accelerations and declines, the authors investigate whether a group of African"leopards"- the regional equivalent of Asia's"tigers"- is beginning to emerge.
    Keywords: Economic Conditions and Volatility,Achieving Shared Growth,Economic Theory&Research,Economic Growth,Inequality
    Date: 2008–09–01
  9. By: Miet Maertens
    Abstract: In this paper we address the question of farm-nonfarm linkages at the household level for a case-study in Senegal. We examine whether increasing off-farm employment opportunities for rural households – resulting from increased horticulture exports and associated agro-industrialization – has benefitted the smallholder farm sector through investment linkages. We use data from a household survey in the main horticulture export region in Senegal. We find that access to unskilled employment in the export agro-industry has contributed to alleviation farmers’ liquidity constraints, resulting in increased smallholder agricultural production.
    Keywords: farm-nonfarm linkages, agri-food exports, smallholder farming, rural development
    JEL: J23 O12 Q12 Q17
    Date: 2008
  10. By: Fox, Louise; Oviedo, Ana Maria
    Abstract: The authors use firm-level survey data from the manufacturing sector in 20 Sub-Saharan African countries to explore the links between labor market regulations and net job creation. A first look at firm characteristics, perceptions, and the dynamics of employment at the firm level suggests that labor regulations are not the main"binding constraint"on job creation. Other issues seem more important at this level of development. The analysis estimates the determinants of net job creation incorporating the legal origin of the country as a proxy for regulation. The findings show that, after controlling for other firm-level characteristics, legal origin is uncorrelated with net job creation in the short run.
    Keywords: Labor Markets,Labor Policies,Microfinance,Banks&Banking Reform,Labor Management and Relations
    Date: 2008–09–01
  11. By: Santos-Paulino, Amelia U.
    Abstract: This paper analyses the patterns of export productivity and trade specialization profiles in the China, Brazil, India and South Africa, and in other regional groupings. In doing so, the investigation calculates a time varying export productivity measure using highly disaggregated product categories. The findings indicate that export productivity is mainly determined by real income and human capital endowments. Importantly, the study reveals significant differences in the export productivity and specialization patterns of countries with comparable per capita income levels. For instance, China?s export productivity and implied export sophistication is in line with that of countries with higher per capita incomes, including some OECD industrial economies.
    Keywords: export productivity, trade specialization, comparative advantage
    Date: 2008
  12. By: Henley, John; Kratzsch, Stefan; Kulur, Mithat; Tandogan, Tamer
    Abstract: The burgeoning literature on outward foreign direct investment from emerging markets has largely focused on analysing the motives of investors as reported by parent companies. This paper, instead, focuses on firm-level investments originating from China, India or South Africa in fifteen host countries in sub-Saharan Africa (SSA). The analysis is based on a sub-set of firms drawn from the overall sample of 1,216 foreign-owned firms participating in the UNIDO Africa Foreign Investor Survey, carried out in 2005. The sample of investments originating from China, India and South Africa is analysed in terms of firm characteristics, past and forecast performance in SSA over three years and management?s perception of ongoing business conditions. Comparisons are made with foreign investors from the North. The paper concludes that while investors in SSA from the three countries are primarily using their investment to target specific markets, they are largely operating in different sub-sectors. While there appear to be specific features that firms from a given country of origin share, there are no obvious operating-level features they all share apart from market seeking.
    Keywords: South-South FDI, market-seeking, sub-Saharan Africa, China, India, South Africa
    Date: 2008
  13. By: Bah, El-hadj M.
    Abstract: Dierences in key features of the development process across rich and poor countries can provide clues to the sources of the large variation of cross- country income. Kuznets included structural transformation as one of six stylized facts of economic development, nding that developed countries all followed the same process. In this paper, I compare structural transformation processes in developed and developing countries. I nd that developing countries follow distinct structural transformation paths that deviate from that followed by developed countries. A puzzling nding is the presence of substantial sectoral changes during times of economic stagnation or decline.
    Keywords: Africa; Asia; Latin America; Structural Transformation; Eco- nomic Development; Structural Change
    JEL: O11 O10 O57 O14
    Date: 2007–11
  14. By: Michel Fok (Annual crop systems - CIRAD : UPR102)
    Abstract: Cotton sectors in Sub-Saharan Africa (SSA) were run by monopolistic para-statal organisms for a long time. They embarked upon a restructuring/liberalisation process as of the mid-1980s but the outcomes were mitigated at best. As these sectors resemble service distribution networks (telecommunication, power, etc.) in terms of historical monopolies and deregulation, cotton development in SSA could be reviewed and their current restructuring appraised according to economics of networks models.This paper stresses that cotton sectors in SSA could be considered as service networks. They have a 3-layer morphology and comply with the five recognition criteria as suggested by Curien (2000). Stylised facts regarding network dynamics closely fit former cotton sector development patterns in most SSA countries. Cotton development did not occur without the related networks reaching a critical size that public intervention helped to attain through a time-demanding process.In areas where cotton production is not very developed, it would not be worthwhile to attempt to restructure existing cotton networks as they are of insufficient size. Where cotton production is well developed, such deregulation could be considered but not through a vertical disintegration procedure. Splitting an existing nationwide monopoly into a limited number of local monopolies is a way of preserving vertical integration and of facilitating geographical regulation which should be more efficient and comprehensive than regulating only through purchase price fixing.
    Keywords: economics of networks; cotton; deregulation; Mali; privatization; liberalization
    Date: 2008–01–08
  15. By: Portugal-Perez, Alberto; Wilson, John S.
    Abstract: This paper reviews data and research on trade costs for Sub-Saharan African countries. It focuses on: border-related costs, transport costs, costs related to behind-the border issues, and the costs of compliance with rules of origin specific to preferential trade agreements. Trade costs are, on average, higher for African countries than for other developing countries. Using gravity-model estimates, the authors compute ad-valorem equivalents of improvements in trade indicators for a sample of African countries. The evidence suggests that the gains for African exporters from improving the trade logistics half-way to the level in South Africa is more important than a substantive cut in tariff barriers. As an example, improving logistics in Ethiopia half-way to the level in South Africa would be roughly equivalent to a 7.5 percent cut in tariffs faced by Ethiopian exporters.
    Keywords: Transport Economics Policy&Planning,Free Trade,Economic Theory&Research,Trade Policy,Trade Law
    Date: 2008–09–01

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