nep-afr New Economics Papers
on Africa
Issue of 2008‒12‒14
thirteen papers chosen by
Quentin Wodon
World Bank

  1. Corruption and trust in political institutions in sub-Saharan Africa By Emmanuelle Lavallée; Mireille Razafindrakoto; François Roubaud
  2. Estimation of Missing Intra-African Trade By Villoria, Nelson
  3. Foreign Direct Investment and Stock market Development: Ghana’s Evidence By Adam, Anokye M.; Tweneboah , George
  4. Implications of Oil Price Shocks for Monetary Policy in Ghana: A Vector Error Correction Model By Tweneboah , George; Adam, Anokye M.
  6. When Migrant Remittances Are Not Everlasting, How Can Morocco Make Up ? By Fida Karam
  7. Export Demand Elasticities as Determinants of Growth: Estimates for Mauritius By Habiyaremye, Alexis; Ziesemer, Thomas
  8. The Impact of Agricultural Aid on Agricultural Sector Growth By Kaya, Ozgur; Kaya, Ilker; Gunter, Lewell
  9. Poverty, Armed Conflict and Financial Instability By Baddeley, M.C.
  12. Increased Cocoa Bean Exports under Trade Liberalization: A Gravity Model Approach By Yeboah, Osei-Agyeman; Shaik, Saleem; Wozniak, Shawn; Allen, Albert J.
  13. Rich meets Poor - An International Fairness Experiment By Alexander W. Cappelen; Karl Ove Moene; Erik Ø. Sørensen; Bertil Tungodden

  1. By: Emmanuelle Lavallée (DIAL, Paris); Mireille Razafindrakoto (DIAL, IRD, Paris); François Roubaud (DIAL, IRD, Paris)
    Abstract: (english) This paper analyzes the impact of corruption on the extent of trust in political institutions using a rich collection of comparable data provided by the Afrobarometer surveys conducted in 18 sub-Saharan African countries. More specifically, we set out to test the “efficient grease” hypothesis that corruption can strengthen citizens’ trust since bribe paying and clientelism open the door to otherwise scarce and inaccessible services and subsidies, and that this increases institutional trust. Our findings reject this theoretical argument. We show that corruption never produces trust-enhancing effects regardless of the evaluation of public service quality. The results reveal how perceived and experienced corruption impact negatively, but differently, on citizens’ trust in political institutions. The adverse effect of perceived corruption decreases with the fall in public service quality, whereas the negative effect of experienced corruption decreases as public service quality increases. _________________________________ (français) Cet article explore les interactions entre la confiance institutionnelle et la corruption à partir d’un riche corpus d’enquêtes-ménages comparables : les enquêtes Afrobaromètre réalisées dans 18 pays d’Afrique sub-saharienne. Plus précisément, il teste les théories de l’ « huile dans les rouages » selon lesquelles la corruption peut renforcer la confiance des citoyens en leur permettant d’accéder à des services publics autrement inaccessibles. Nos résultats infirment clairement ces théories. Nous montrons que la corruption réduit clairement la confiance et ce quelque soit la qualité des services gouvernementaux. Ils suggèrent toutefois que l’expérience et la perception de la corruption ont des effets distincts sur la confiance institutionnelle.
    Keywords: Corruption, Institutions.
    JEL: D73 P48
    Date: 2008–09
  2. By: Villoria, Nelson
    Abstract: Missing trade is defined as the exports and imports that may have taken place between two potential trading partners, but which are unknown to the researcher because neither partner reported them to the United Nation’s COMTRADE, the official global repository of trade statistics. In a comprehensive sample of African countries, over 40% of the potential trade flows fit this definition. For a continent whose trade integration remains an important avenue for development, this lack of information hinders the analysis of policy mechanisms -- such as the Economic Partnership Agreements with the EU -- that influence intra-regional trade patterns. This paper estimates the likely magnitude of the missing trade by modeling the manufacturing trade data in the GTAP Data Base using a gravity approach. The gravity approach employed here relates bilateral trade to country size, distance, and other trade costs while explicitly considering that high fixed costs can totally inhibit trade. This last feature provides an adequate framework to explain the numerous zero-valued flows that characterize intra-African trade. The predicted missing exports are valued at approximately 300 million USD. The incidence of missing trade is highest in the lowest income countries of Central and West Africa.
    Date: 2008
  3. By: Adam, Anokye M.; Tweneboah , George
    Abstract: Using multivariate cointegration and error correction model, this paper examines the impact of Foreign Direct Investment (FDI) on the stock market development in Ghana. Our results indicate that there exists a long-run relationship between FDI, nominal exchange rate and stock market development in Ghana. We find that a shock to FDI significantly influence the development of stock market in Ghana.
    Keywords: Foreign Direct Investment and Stock market Development: Ghana’s Evidence
    JEL: F20 C50 A11
    Date: 2008
  4. By: Tweneboah , George; Adam, Anokye M.
    Abstract: We estimate a Vector Error Correction Model to explore the long run and short run linkages between the world crude oil price and economic activity in Ghana for the period 1970:1 to 2006:4. The results point out that there is a long run relationship between the variables under consideration. We find that an unexpected oil price increase is followed by an increase in price level and a decline in output in Ghana. We argue that monetary policy has in the past been with the intention of lessening negative growth consequences of oil price shocks, at the cost of higher inflation.
    Keywords: Oil price shock; cointegration; vector error correction; impulse response
    JEL: E31 E52 Q43
    Date: 2008
  5. By: Yigezu, Yigezu A.; Sanders, John H.
    Abstract: Many developing regions have excellent potential agricultural resources. However, historically population has become so concentrated on such small holdings that acute poverty and malnutrition now predominate. The food scientists€٠response to the chronic nutritional problem has often been subsidized bio-fortification with nutritional supplements or more recently cultivars with higher nutrient levels. Where much of the population is in this inadequate nutrition category as in highland Ethiopia, the supplements are neither financially feasible nor sustainable. The cultivars can provide a few critical nutrients but are not a comprehensive solution. To improve nutrition, it is necessary to increase income so that an increased quality and quantitative diet can be obtained. Here we evaluate a strategy to introduce new agricultural technologies where a central aspect of evaluation is combining the nutritional and income goals. This analysis is undertaken in the Qobo valley, Amhara state, Ethiopia. Using behavioralist criteria for decision making defined by the farmers, the effects of different potential combinations of technologies and supporting agricultural policies on the household nutritional gaps and farmers€٠incomes are analyzed. An integrated approach involving the combined technologies of water harvesting, fertilization and Striga resistance combined with improved credit programs has the potential to increase income by 31% and to eliminate malnutrition except in the most adverse state of nature (10% probability). Both the treatment of the nutritional deficits and the decision making criteria defined by farmers are expected to be useful techniques in other developing country technology and policy analysis as well.
    Keywords: Adoption, agricultural technologies, Striga resistance, inorganic fertilizers, tied-ridges, marketing strategies, inventory credit, nutrition, income, capped-lexicographic utility., Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, International Development, Production Economics, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty, O13, O33, Q16, Q18,
    Date: 2008–05
  6. By: Fida Karam (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: In this paper, I run a computable general equilibrium (CGE) model of the Moroccan economy to investigate the transmission channels through which remittances affect households and sectors. I give a particular attention to the investment of remittances in the real estate sector, by allowing a segmentation of the savings market. To begin with, I assess the negative impact of immigration restrictive policies and permanent migration on the future evolution of remittances. Then I ask what would be the appropriate policies to take the maximum profit from current flows. It turns out that channelling investment from real estate to productive sectors is unexpectedly harmful in terms of growth and welfare. Positive effects stem only from government ability to attract investors through an improvement in the country risk premium, and private efforts to reduce international transfer costs.
    Keywords: Sequential dynamics, computable general equilibrium model, migration, remittances.
    Date: 2008–11
  7. By: Habiyaremye, Alexis (UNU-MERIT); Ziesemer, Thomas (UNU-MERIT, and Maastricht University)
    Abstract: In this paper, we combine the export-led and import-led growth hypotheses in a growth model in which the importation of foreign capital goods and the demand elasticities of own export products explain the growth opportunities and the technical progress of developing countries. This model, based on imported capital goods uses Mauritius’ data on capital investment, employment, export partners’ growth and terms of trade to estimate price and income elasticities of export demand, total-factor productivity growth and economies of scale. These elasticities are then used to assess how the growth in export partners’ income is converted into domestic growth. The implications of the presence of low or high export demand elasticities are discussed by relating them to various strands of trade and growth literature. Based on the results of this estimation, we also calculate steady-state growth rates, engine and handmaiden effects of growth as well as the dynamic steady-state gains from trade for this latecomer export economy. The implications of steady state results are also discussed in the light of the Mauritian employment and growth perspectives.
    Keywords: growth models, trade, capital goods, exports, total factor productivity
    JEL: O11 O19 O41 F43
    Date: 2008
  8. By: Kaya, Ozgur; Kaya, Ilker; Gunter, Lewell
    Abstract: The primary objective of this study is to asses the impact of agricultural foreign aid on agricultural output in developing countries. In order to examine this effect, we will employ a cross-section time-series econometric model where we employ annual data from 1974 through 2005 for 112 developing countries that are aid recipients.
    Keywords: International Development,
    Date: 2008
  9. By: Baddeley, M.C.
    Abstract: Civil conflict has far-reaching effects on underdeveloped economies. Whilst military expenditure may be diverted into projects that encourage human capital accumulation and the construction of essential infrastructure, conflict destroys institutions and infrastructure generating financial instability and exacerbating stagnation and underdevelopment. Vicious circles emerge as socioeconomic instability contributes to ongoing civil unrest and financial instability, in turn increasing the risk of future conflicts. In this paper, the relationships between conflict, finance and poverty are analysed by exploring the hypothesis that poverty and conflict are magnified by financial factors. Interactions between conflict, absolute poverty and finance are estimated using least squares and binary dependent variable techniques adapted to capture simultaneity, with heterogeneity captured using fixed effects techniques. The results suggest a strongly significant positive relationship between poverty and conflict; the risk of war is positively associated with financial factors suggesting that financial resources will influence poverty indirectly by increasing risks of conflict.
    Keywords: Civil conflict, absolute poverty, development finance.
    JEL: O15 O43 P46
    Date: 2008–12
  10. By: Bhagowalia, Priya; Chen, Susan E.; Masters, William A.
    Abstract: Malnutrition is manifested in various degrees of both underweight and overweight, with large differences and rapid changes in their prevalence and severity. This paper introduces a new approach to characterizing the distribution of a population€ٳ nutritional status, to help analyze changes in that distribution over time and across countries. Our method draws on the poverty literature to construct Foster-Greer-Thorbecke measures for the incidence and severity of under and overweight, based on deviations in either direction from the median of a healthy population. We apply this median-based measure to the nutritional status of over 400,000 preschool children, as measured in 130 DHS surveys covering 53 countries over a period from 1986 to 2006. Unlike conventional threshold-based methods, the new approach counts changes in every child€ٳ bodyweight. We find that this offers a more sensitive measure of differences across countries and changes over time, showing in particular that children€ٳ bodyweights are closely linked to local agricultural output and gender equality as well as real GDP per capita.
    Keywords: Underweight, Overweight, Malnutrition, Poverty, Food Consumption/Nutrition/Food Safety, Food Security and Poverty, I12, Q18,
    Date: 2008
  11. By: Damien Besancenot (CEPN - Centre d'économie de l'Université de Paris Nord - CNRS : UMR7115 - Université Paris-Nord - Paris XIII); Radu Vranceanu (Department of Economics - ESSEC)
    Abstract: This paper analyzes the decision of a migrant to return or stay within the framework of a signaling model withexogenous migratory costs. If employers have only imperfect information about the type of a worker and goodworkers migrate, bad workers might copy their strategy in order to get the same high wage as the good workers.Employers will therefore reduce the wage they pay to migrants and good workers incur a loss compared to theperfect information setup. In one hybrid equilibrium of the game, the more bad workers migrate, the higher theincentive for good workers to come back. Policy implications follow.
    Keywords: Temporary migration, Return migrants, Hybrid Bayesian Equilibrium, Signaling model.
    Date: 2008–12–15
  12. By: Yeboah, Osei-Agyeman; Shaik, Saleem; Wozniak, Shawn; Allen, Albert J.
    Abstract: Gravity models were developed to estimate the potential bilateral exports of cocoa under trade liberalization by the sixteen major cocoa producing countries to the US using panel data from 1989 to 2003. The results indicate that differences between resource endowment, relative size of economies, and the sum of bilateral GDP of U.S. and exporting countries are the major determinants. Thus, as trade is liberalized, farmers share of the world price of cocoa increases and this raises exports.
    Keywords: Gravity models, Bilateral exports, Market liberalization, Cocoa, Fixed Effects Model, Random Effects Model, Pooled O.L.S., International Relations/Trade, Research Methods/ Statistical Methods, F10, F13,
    Date: 2008
  13. By: Alexander W. Cappelen (Norwegian School of Economics and Business Administration, Bergen); Karl Ove Moene (University of Oslo); Erik Ø. Sørensen (VU University Amsterdam); Bertil Tungodden (Norwegian School of Economics and Business Administration, and Chr. Michelsen Institute)
    Abstract: Why do people in rich countries not transfer more of their income to people in the world's poorest countries? To study this question and the relative importance of needs, entitlements, and nationality in people's social preferences, we conducted a real effort fairness experiment where people in two of the world's richest countries, Norway and Germany, interacted directly with people in Uganda and Tanzania, two of the world's poorest countries. In this experiment, the participants were given the opportunity to transfer money to poor persons with whom they were matched. The study provides four main findings. First, entitlement considerations are crucial in explaining the distributive behavior of rich people in the experiment; second, needs considerations matter a lot for some participants; third, the participants acted as moral cosmopolitans; and finally, the participants' choices are consistent with a self-serving bias in their social preferences.
    Keywords: fairness; experiments
    JEL: C90 D63
    Date: 2008–10–14

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