nep-afr New Economics Papers
on Africa
Issue of 2009‒01‒31
sixteen papers chosen by
Quentin Wodon
World Bank

  1. Explaining Episodes of Growth Accelerations, Decelerations, and Collapses in Western Africa By Gonzalo Salinas; Patrick A. Imam
  2. Flexigemony and Force in China's Economic Strategy in Africa: Sudan and Zambia Compared By Pádraig Carmody and Ian Taylor
  3. Pensions in Africa By Fiona Stewart; Juan Yermo
  4. Monetary Policy and Relative Price Shocks in South Africa and Other Inflation Targeters By Secil Topak; Alfredo Cuevas
  5. Modelling monetary policy in South Africa: Focus on inflation targeting era using a simple learning rule By Ruthira Naraidoo; Rangan Gupta
  6. A Game Theoretic Approach to Analyse Cooperation between Rural Households in Northern Nigeria By Gerichhausen, M.; Berkhout, E.D.; Hamers, H.J.M.; Manyong, V.M.
  7. The effect of livestock theft on household poverty in developing countries: The case of Lesotho By Selloane Khoabane; Philip Black
  8. Realising South Africa’s employment potential By Geoff Barnard
  9. Inflation differential in the West African Monetary Zone (WAMZ) area:Implications for unionization By Balogun, Emmanuel Dele
  11. Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya By Pascaline Dupas; Jonathan Robinson
  12. Testing the Inverseness of Fertility and Labor Supply: The Case of Ethiopia By Solomon, Blen; Kimmel, Jean
  13. Smallholder Adjustment in Middle-Income Countries: Issues and Policy Responses By Dalila Cervantes-Godoy; Jonathan Brooks
  14. Modelling Agricultural Trade and Policy Impacts in Less Developed Countries By Jonathan Brooks; George Dyer; Ed Taylor
  15. Will the global financial crisis lead to lower foreign aid? A first look at United States ODA By Ronald U. Mendoza; Ryan Jones; Gabriel Vergara
  16. Multidimensional Human Capital, Wages and Endogenous Employment Status in Ghana By Blunch, Niels-Hugo

  1. By: Gonzalo Salinas; Patrick A. Imam
    Abstract: The growth literature has had problems explaining the "sub-Saharan African growth dummy" in cross-country regressions. Instead of taking the usual approach of focusing on long-run growth and assuming that sub-Saharan countries have homogenous parameters in growth regressions, we concentrate our analysis on episodes of growth turnarounds (identifying growth accelerations, decelerations, and collapses) and use only West African countries in our sample. The driving force of growth turnarounds are estimated by analyzing external shocks, political and institutional changes, economic reforms, and indicators particularly relevant to the region. Using probits for a group of 22 Western African economies for the period 1960-2006, we find that growth accelerations are most clearly associated with external shocks, economic liberalization, political stability, and closeness to the coast; decelerations occurred during short-lived regimes and when corruption indices weakened; and collapses are linked to external shocks, falling domestic credit, and proximity to the coast. We then identify policy implications.
    Keywords: Economic growth , West Africa , Economic reforms , External shocks , Terms of trade , Transfers of foreigners income , Economic models ,
    Date: 2008–12–17
  2. By: Pádraig Carmody and Ian Taylor
    Abstract: The Chinese government and its companies have dramatically increased their presence in Africa in the last decade. There has been much media interest and commentary on the impacts of China on governance in Africa, as it is often seen to be strengthening authoritarian states such Sudan and Zimbabwe (Arrighi 2007). However, China is also engaging with more democratic states and spaces, such as Zambia. This paper seeks to explore the impacts of China’s increased engagement with Africa on governance through a comparative case study of two contrasting cases: Sudan and Zambia, using the concept of flexigemony. Contrary to popular perception, China has sometimes been a moderating force in Sudan, while provoking violence in Zambia.
    Date: 2008–01–16
  3. By: Fiona Stewart; Juan Yermo
    Abstract: This paper discusses why the development of pension systems is important for the African region. It also looks at the current pension arrangements in selected African countries. The paper was designed as an overview/background document to provide context and assist discussion at the OECD/IOPS Global Forum on Private Pensions, which was held in Mombasa, Kenya on the 30th/31st October, 2008. The OECD and IOPS acknowledge the leadership of other organizations in terms of development and African specific issues – notably the World Bank, International Labor Organistaion (ILO) and IMF.<P>Les retraites en Afrique<BR>Le présent document examine les raisons pour lesquelles le développement des systèmes de retraite est important pour la région de l'Afrique. Il décrit également les dispositifs de retraite en vigueur dans un certain nombre de pays africains. Il s'agit d'un document de synthèse/d'information destiné à situer et à faciliter les débats du Forum mondial OCDE/OICP sur les pensions privées qui s'est tenu à Mombasa (Kenya) les 30 et 31 octobre 2008. L'OCDE et l'OICP tiennent à souligner le rôle prépondérant d'autres organisations dans le domaine du développement et en ce qui concerne les questions liées à l‘Afrique – notamment la Banque mondiale, l'Organisation internationale du travail (OIT) et le FMI.
    Keywords: pensions, retraites, demographic trends and forecasts, financement, funding, Africa, Afrique, politique sociale et du travail, poverty alleviation, réduction de la pauvreté
    JEL: G15 G18 G23 J26
    Date: 2009–01
  4. By: Secil Topak; Alfredo Cuevas
    Abstract: When faced with a relative price shock, monetary authorities often aim to contain its second round effects on inflation while accepting first round effects. We analyze the experience of South Africa and other inflation targeters to explore whether and when this policy prescription implies changing the monetary policy stance. Inflation targeting central banks differ on how aggressively they typically react to relative price shocks, reflecting differences in resilience of underlying inflation to such shocks. An examination of individual policy decisions reveals the importance of the broader economic context in framing the responses to relative price shocks.
    Keywords: Monetary policy , South Africa , External shocks , Inflation targeting , Pricing policy , Central banks , Energy prices , Commodity prices ,
    Date: 2009–01–06
  5. By: Ruthira Naraidoo (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria)
    Abstract: A simple empirical nonlinear framework is used to analyse monetary policy between 1983 and 2007 in South Africa, focusing on the policy of in?ation targeting introduced in Feb 2000, more precisely when the South African Reserve Bank (SARB) announced that an inflation zone targeting regime of 3-6% would be in place. We find that a model specification embodying a simple inflation learning rule for the future inflation rate seems to provide a better understanding of the decision process made by the SARB in its interest rate setting policy. The main findings are that the adoption of inflation targeting led to significant changes in monetary policy, secondly, post-2000 monetary policy is asymmetric as policy-makers respond more to downward deviation of inflation away from the target, thirdly, post-2000 policy-makers may be attempting to keep inflation within the 4.5%-6.9% range rather than pursuing a target zone of 3-6% as generally pre- announced and fourthly, the response of monetary policy to in?ation is nonlinear as interest rates respond more when inflation is further from the target.
    Keywords: Monetary policy, inflation targeting, inflation learning rule, nonlinear smooth transition model
    JEL: C51 E52 E58
    Date: 2009–01
  6. By: Gerichhausen, M.; Berkhout, E.D.; Hamers, H.J.M.; Manyong, V.M. (Tilburg University, Center for Economic Research)
    Abstract: Much research focuses on development of new agricultural technologies to reduce poverty levels of the large population of smallholder farms in Sub Saharan Africa. In this paper we argue that smallholders can also increase their production in a different way, namely by using their resources more efficiently through cooperation. This is obtained by grouping their (heterogeneous) resources and making joint decisions based on the aggregate resources. Afterwards, the gains of the joint production are divided, such that each farmer remains independent. This type of cooperation is modeled using linear programming and cooperative game theory. While linear programming establishes insight in optimal farm plans for farmers that cooperate, game theory is used to generate fair divisions of the extra gain that is established by cooperation. The model is applied to a village in Northern Nigeria. Households are clustered based on socio-economic parameters, and we explore cooperation. The optimal farm plan of the cooperative (i.e., farmers cooperate) contains more crops with high market and nutritional value, such as cowpea and sugarcane. We show that the gross margin of the cooperative is 12% higher than the sum of the individual gross margins. To divide these gains, we consider four established solution concepts from game theory that divide these extra gains: the Owen value, Shapley value, compromise value and nucleolus. An interesting result is that all farmers gain from cooperation and that the four solution concepts give similar results. Finally, we show how the provision of micro-credit can be used to stimulate cooperation in practice, benefiting the least-endowed farmers as well.
    Keywords: Linear Programming;Agriculture;Household models;Cooperative Game Theory;Nigeria
    JEL: C61 Q12 C71
    Date: 2008
  7. By: Selloane Khoabane (Department of Economics, University of Stellenbosch); Philip Black (Department of Economics, University of Stellenbosch)
    Abstract: While livestock theft in Lesotho is primarily caused by increased poverty among unemployed workers and drought stricken crop farmers, its effect on stock farmers can be devastating. It reduces the affected households’ own consumption of both the “returns” on their wealth, e.g. milk and wool, and of wealth itself, e.g. meat and hides. In addition, it restricts their ability to sell their returns and wealth in the market place and use the proceeds to acquire other food and non-food products. Some policy implications are also highlighted.
    Keywords: Livestock theft, Lesotho, own consumption, animal products, diversified farming, nutritional status, human capital, HIV/AIDS
    JEL: D11 O12 Q12
    Date: 2009
  8. By: Geoff Barnard
    Abstract: Unemployment in South Africa is extremely high and unevenly distributed, being concentrated among young less-skilled blacks. The legacies of apartheid can explain part of the increase in labour supply and inability of the economy to absorb it which produced the extreme levels of unemployment, but more could have been done to unwind those legacies and other policies and institutions have contributed to the dysfunction of the labour market. Notably, improvements in product market regulation to strengthen competition could help expand formal sector employment. Changes in municipal laws and regulations to ease migration and facilitate informal employment are also likely to be particularly important. Improving the implementation of employment protection legislation could also help reduce unemployment. Efforts to tackle crime could help reduce the brain drain and attract skilled immigrants, which would likely boost demand for less-skilled workers via complementarities. Over the longer term, improvements in basic education will be key to reducing the excess supply of less-skilled workers.<P>Concrétiser le potentiel de l’Afrique du Sud en matière d’emploi<BR>Le chômage en Afrique du Sud est extrêmement élevé et très inégalement réparti, étant concentré parmi les jeunes Noirs moins qualifiés. L’héritage de l’apartheid peut expliquer une partie de la hausse de l’offre de travail et l’incapacité de l’économie à l’absorber, ce qui a produit les niveaux extrêmes du chômage, mais on aurait pu faire plus pour contrer cet héritage, et d’autres politiques et institutions ont contribué au mauvais fonctionnement du marché du travail. Notamment, des améliorations de la réglementation du marché des produits afin de renforcer la concurrence pourraient aider à augmenter l’emploi dans le secteur formel. Des amendements des lois et règlements municipaux afin de faciliter la migration et l’emploi informel pourraient eux aussi aider à réduire le taux de chômage. L’amélioration de la mise en place de la législation de la protection de l’emploi pourrait également aider à réduire le chômage. Des efforts pour combattre la criminalité pourrait aider à diminuer la « fuite des cerveaux » et attirer des immigrants qualifiés, ce qui augmenterait probablement la demande des travailleurs moins qualifiés par le biais des complémentarités. À plus long terme, une amélioration de l’éducation de base sera déterminante pour la réduction de l’excédant des travailleurs moins qualifiés.
    Keywords: unemployment, chômage, education, marché du travail, employment, emploi, éducation, employment protection, labour force participation rates, taux d'activité, training, formation professionnelle, South Africa, working age population, union wage differentials, Afrique du Sud, primes syndicales
    JEL: J11 J3 J5 J7
    Date: 2009–01–26
  9. By: Balogun, Emmanuel Dele
    Abstract: This paper examines the determinants of inflation differentials in a panel of West African Monetary Zone (WAMZ) states vis-à-vis its set benchmark for macroeconomic convergence since 2000 to date. Using a stylized 5-country model of WAMZ area, the differences in national inflation is analyzed in light of country specific shocks or differences in the monetary transmission mechanisms. The main results show macroeconomic (price) stabilization around a desired target was not attained. Over the sample period, the un-weighted average regional inflation rates were most often above a single digit target and vary widely among the countries. The major monetary policy instruments determinants of inflationary divergence are the pursuit of distorted interest rates, exchange rates overvaluation and expansionary monetary policies, which penalized credit and accentuated output supply/demand gaps.
    Keywords: Inflation differentials; price convergence; exchange rate; WAMZ members; panel data
    JEL: E31 E52
    Date: 2009–01–27
  10. By: Rangan Gupta (Department of Economics, University of Pretoria); Alain Kabundi (Department of Economics and Econometrics, University of Johannesburg)
    Abstract: This paper assesses the impact of monetary policy on real house price growth in South Africa using a factor-augmented vector autoregression (FAVAR), estimated based on a large data set comprising of 246 quarterly series over the period 1980:01 to 2006:04. The results based on the impulse response functions indicate that, in general, house price inflation responds negatively to monetary policy shock, but the responses are heterogeneous across the middle-, luxury- and affordable-segments of the housing market. The luxury-, large-middle- and medium-middle-segments are found to respond much more than the small-middle- and the affordable-segments of the housing market. More importantly, we find no evidence of the home price puzzle, observed previously by other studies that analyzed house prices using small-scale models. We put this down to the benefit gained from using a large information set.
    Keywords: Monetary Policy; Real House Price Growth; FAVAR
    JEL: C32 E52 R2
    Date: 2009–01
  11. By: Pascaline Dupas; Jonathan Robinson
    Abstract: This paper presents results from a field experiment designed to test whether savings constraints prevent the self-employed from increasing the size of their businesses. We opened interest-free savings accounts in a local village bank in rural Kenya for a randomly selected sample of poor daily income earners (such as market vendors), and collected a unique dataset constructed from self-reported logbooks that respondents filled on a daily basis. Despite the fact that the savings accounts paid no interest and featured substantial withdrawal fees, take-up and usage was high among women. In addition, we find that the savings accounts had substantial, positive impacts on productive investment levels and expenditures for women, but had no effect for men. These results imply that a substantial fraction of daily income earners face important savings constraints and have a demand for formal saving devices (even for those that offer negative de facto interest rates). We also find some suggestive evidence that female entrepreneurs draw down their working capital in response to health shocks, and that the accounts enabled the treatment group to cope with these shocks without having to liquidate their inventories.
    JEL: G21 L26 O12
    Date: 2009–01
  12. By: Solomon, Blen (Grand Valley State University); Kimmel, Jean (Western Michigan University)
    Abstract: We test the inverseness of fertility and labor supply for married women in Ethiopia to determine if previous research (focusing on developed countries) that has found an inverse relationship between fertility and labor supply is applicable to least developed countries. The research into fertility and labor supply has relied on a variety of methodologies for addressing the endogeneity of fertility. Using data from the Demographic Health Survey (DHS) of Ethiopia, we use the husband's desire for children to instrument for fertility. Our empirical results fail to support an inverse relationship between fertility and labor supply in Ethiopia, perhaps because the persistence of traditional family structures in the face of rising national female employment facilitates maternal employment. This finding has implications for other LDCs as well.
    Keywords: labor supply, fertililty
    JEL: J13 J22
    Date: 2009–01
  13. By: Dalila Cervantes-Godoy; Jonathan Brooks
    Abstract: This paper discusses the adjustment pressures faced by smallholders in middle-income countries, considers the types of policy response that are warranted, and proposes an integrated framework for more inclusive development. Central to this framework is the recognition that the long-term (i.e. inter-generational) future of the majority of smallholders lies outside farming. Hence a range of development pathways need to be facilitated, including improved competitiveness within the sector, income diversification (either within or outside agriculture) and the movement to jobs in other sectors. In order to facilitate adjustment, targeted agricultural policies need to be designed in conjunction with a range of complementary economy-wide measures.
    Keywords: development, agriculture, government policy, structural adjustment, poverty, smallholders
    JEL: O13 O20 Q10 Q18
    Date: 2008–12
  14. By: Jonathan Brooks; George Dyer; Ed Taylor
    Abstract: This paper proposes a methodological framework for examining the distributional effects of alternative agricultural policies in less developed economies. The framework combines disaggregated household models with an explicit modelling of the linkages between product and factor markets.
    Keywords: income distribution, poverty, agricultural policy, disaggregated modelling, farm household, welfare
    JEL: D13 D21 D23 D31 D33 Q12 Q18
    Date: 2008–12
  15. By: Ronald U. Mendoza (UNICEF Division of Policy and Practice, Social Policy and Economic Analysis Unit); Ryan Jones (Fordham University, Department of Economics, International Political Economy and Development (IPED) Program); Gabriel Vergara (Fordham University, Department of Economics, International Political Economy and Development (IPED) Program)
    Abstract: Analyzing US economic and foreign aid data from 1967 to 2007, this paper investigates whether adverse economic and financial conditions are negatively linked to official development assistance (ODA). It finds empirical evidence that US ODA has tended to decline as its economic conditions worsen. A 1 unit increase in the misery index (sum of inflation and unemployment) is associated with a roughly 0.01 percentage point decline in US ODA expressed as a share of GNI. Furthermore, an increase in financial volatility from 1 percent to 2 percent (measured by the standard deviation of the rate of return of the S&P500) is associated with a decrease in US ODA by about $2.78 billion. Informed by the empirical results in this paper, and based on very rough guesstimates, a potential decline in US ODA of anywhere from 13 to 30 percent could occur depending on the severity of the economic conditions in 2009. This predicted decline in ODA is much lower than some of the guesstimates so far by different analysts. Based on the US historical pattern, ODA is indeed at risk; nevertheless, it need not decline significantly during adverse economic times.
    Keywords: ODA, foreign aid, financial crisis, misery index
    JEL: F35 O10
    Date: 2009
  16. By: Blunch, Niels-Hugo (Washington and Lee University)
    Abstract: Previous studies of labor market outcomes such as employment and wages have mostly been limited to investigating the impact of formal schooling only and, as a consequence, have seldom considered skills or alternative routes to acquiring skills, such as adult literacy programs, or other types of education. This paper examines these issues for Ghana, by estimating the joint effects of formal schooling, literacy and numeracy skills, and adult literacy programs on employment and wage outcomes. Wage and employment status equations are estimated jointly, allowing employment status to be endogenous. Substantial returns to basic cognitive skills are established, while the education system – especially the lower levels of formal education – is found to be relatively successful in creating these skills. At the same time the results hint at there being substantial returns to skills other than basic literacy and numeracy. These skills appear to be produced mostly from technical and vocational education and training and at higher levels of formal education. Adult literacy participants are less likely to be economically inactive and more likely to be self-employed, hinting at the income-generating activities component of these programs having indirect effects on wages through its effect on labor market participation, especially for females, individuals with no formal education, and in urban areas.
    Keywords: wage equations, employment status, human capital, literacy and numeracy, cognitive and non-cognitive skills, formal education, adult literacy programs, Ghana
    JEL: I31 J24 O15
    Date: 2008–12

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