nep-afr New Economics Papers
on Africa
Issue of 2009‒02‒14
fourteen papers chosen by
Quentin Wodon
World Bank

  1. Modelling stock returns in Africa's emerging equity markets By Alagidede, Paul; Panagiotidis, Theodore
  2. Expanding Trade within Africa: The Impact of Trade Facilitation By Njinkeu, Dominique; S. Wilson, John; Powo Fosso, Bruno
  3. The shortage of medical workers in sub-Saharan Africa and substitution policy By Arnaud Bourgain; Patrice Pieretti; Benteng Zou
  4. Who would eat more with a Food Voucher Programme in South Africa? By Jan van Heerden
  6. The Trade Specialization of SANE:Evidence from Manufacturing Industries By Alessandrini , Michele; Enowbi Batuo , Michael
  7. Stadium Architecture and Regional Economic Development: International Experience and the Plans of Durban By Wolfgang Maennig; Florian Schwarthoff
  8. Soil Properties and Soil Conservation Investments in Agricultural Production - a Case study of Kenya’s Central Highlands By Ekbom, Anders; Sterner, Thomas
  9. Modeling Services Liberalization: The Case of Tanzania By Jensen, Jesper; F. Rutherford , Thomas; G. Tarr, David
  10. Migration and Economic Mobility in Tanzania: Evidence from a Tracking Survey By Beegle, Kathleen; De Weerdt, Joachim; Dercon, Stefan
  11. Awareness and AIDS: A Political Economy Model By Gani Aldashev; Jean-Marie Baland
  12. Explaining Enterprise Performance in Developing Countries with Business Climate Survey Data By Dethier, Jean-Jacques; Hirn, Maximilian; Straub, Stephane
  13. Role of media in curbing corruption: the case of Uganda under President Yoweri K. Museveni during the “no-party” system By Monica Nogara

  1. By: Alagidede, Paul; Panagiotidis, Theodore
    Abstract: We investigate the behaviour of stock returns in Africa's largest markets namely, Egypt, Kenya, Morocco, Nigeria, South Africa, Tunisia and Zimbabwe. The validity of the random walk hypothesis is examined and rejected by employing a battery of tests. Secondly we employ smooth transition and conditional volatility models to uncover the dynamics of the first two moments and examine weak from efficiency. The empirical stylized facts of volatility clustering, leptokurtosis and leverage effect are present in the African data.
    Keywords: Stock Returns; Weak Form Efficiency; Asymmetric Volatility; African Stock Markets
    Date: 2009–01
  2. By: Njinkeu, Dominique (International Lawyers and Economists Against Poverty (ILEAP)); S. Wilson, John (The World Bank); Powo Fosso, Bruno (Human Resources and Social Development Canada (HRSDC))
    Abstract: This paper examines the impact of trade facilitation on intra-African trade. The authors examine the role of trade facilitation reforms, such as increased port efficiency, improved customs, and regulatory environments, and upgrading services infrastructure on trade between African countries. They also consider how regional trade agreements relate to intra-African trade flows. Using trade data from 2003 to 2004, they find that improvement in ports and services infrastructure promise relatively more expansion in intra-African trade than other measures. They also show that, almost all regional trade agreements have a positive effect on trade flows
    Keywords: Trade; Africa; Regional Integration; Trade Facilitation
    JEL: F10 F15
    Date: 2008–12–01
  3. By: Arnaud Bourgain (CREA, Université du Luxembourg); Patrice Pieretti (CREA, Université du Luxembourg); Benteng Zou (CREA, Université du Luxembourg)
    Abstract: Substitution policies are strategies sometimes chosen in Sub-Saharan Africa for curtailing the shortage of health professionals especially caused by the outflow of medical personnel. The aim of our contribution is to propose a way to assess the merits and drawbacks of substitution policies by developing a simple growth model of healthcare productivity with medical brain drain. Within this framework, we use a medical care production function of the CES type which aggregates low and high specialized health workers. We then run simulations which compare scenarios with and without substitution strategies by using data from the Ghana’s medical sector.
    Keywords: medical shortage, healthcare policy, substitution policy
    JEL: I18 F22
    Date: 2008–10
  4. By: Jan van Heerden (Department of Economics, University of Pretoria)
    Abstract: A Computable General Equilibrium model is used to find the effects of a food voucher scheme on the economy in South Africa. If firms consider the issuing of vouchers as increased remuneration, they will hire fewer labourers. The higher labour cost increases the total cost of production and lowers supply. Real Gross Domestic Product decreases and the economy becomes worse off. However, depending on the size of the government's involvement in such a scheme as well as the tax policies that are used to fund it, a food voucher scheme could benefit the poor, and improve the distribution of wealth in the country.
    Date: 2008–12
  5. By: Rangan Gupta (Department of Economics, University of Pretoria); Josine Uwilingiye (Department of Economics, University of Pretoria)
    Abstract: Recent empirical evidence on the direct link of inflation targeting and inflation volatility is at best mixed. However, comparing inflation volatility across alternative monetary policy regimes within a country based on conventional ways, used in previous studies, begs the question. The question is not whether the volatility of inflation has changed, but rather whether the volatility is different than it otherwise would have been. In such a backdrop, this paper uses the cosine-squared cepstrum to provide evidence that CPI inflation in South Africa has become more volatile since the first quarter of 2000, when the country moved into an inflation targeting regime, than it would have been had the South African Reserve Bank (SARB) continued with the more eclectic monetary policy approach pursued in the pre-targeting era.
    Keywords: Cosine-Squared Cepstrum; Inflation Targeting; Inflation Volatility; Saphe Cracking
    JEL: C65 E42 E52 E64
    Date: 2009–02
  6. By: Alessandrini , Michele; Enowbi Batuo , Michael
    Abstract: This paper studies the evolution of the foreign trade specialization in manufacturing sectors of South Africa, Algeria, Nigeria and Egypt. These four countries, the so-called SANE, are recently viewed as Africa’s best chance of producing an economic bloc comparable to the BRIC economies of Brazil, Russia, India and China. Using data on trade flows since mid-1970s, the results show that the SANE group has experienced few changes in its trade structure, which is still based on low-technology and slow-growth world demand sectors. The degree of persistence in the specialization model is higher in the case of Algeria and Nigeria, where the dependence on products based on natural resources is stronger.
    Keywords: SANE; Trade specialization; Manufacturing; Lafay index
    JEL: N67 O55 O24 F14
    Date: 2008–06
  7. By: Wolfgang Maennig (University of Hamburg); Florian Schwarthoff (GMP Gerkan Marg & Partners International)
    Abstract: For the FIFA World Cup 2010, South Africa plans to invest heavily. The positive economic effects that the country is hoping for stand in contrast to almost all statistical ex-post studies. This contribution emphasises that these results, usually from research under-taken in the USA, can only be generalised to a limited degree. The density of sports venues in developed countries is so high, that the marginal effects of new stadia are necessarily limited. We also emphasise that stadium design around the world was not hitherto adequately targeted towards positive economic effects. The example of Durban and its plans for a new “iconic” stadium is used to illustrate fundamental principles of stadium design and their embedding in a re-urbanisation process that have to be undertaken in order to consciously achieve positive regional economic effects.
    Keywords: stadium architecture, regional economics, sports economics, World Cup, Durban
    JEL: L83
    Date: 2008–08
  8. By: Ekbom, Anders (Department of Economics, School of Business, Economics and Law, Göteborg University); Sterner, Thomas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This paper integrates traditional economic variables, soil properties and variables on soil conservation technologies in order to estimate agricultural output among small-scale farmers in Kenya’s central highlands. The study has methodological, empirical as well as policy results. The key methodological result is that integrating traditional economics and soil science is highly worthwhile in this area of research. Omitting measures of soil capital can cause omitted variables bias since farmers’ choice of inputs depend both on the quality and status of the soil capital and on other economic conditions such as availability and cost of labour, fertilizers, manure and other inputs. The study shows that: (i) models which include soil capital and soil conservation technologies yield a considerably lower output elasticity of farm-yard manure; (ii) mean output elasticities of key soil nutrients like nitrogen (N) and potassium (K) are positive and relatively large; (iii) counter to our expectations, the mean output elasticity of phosphorus (P) is negative; (iv) soil conservation technologies like green manure and terraces are positively associated with output and yield relatively large output elasticities. The central policy conclusion is that while fertilizers are generally beneficial, their application is a complex art and more is not necessarily better. The limited local market supply of fertilizers, combined with the different output effects of N, P and K, point at the importance of improving the performance of input markets and strengthening agricultural extension. Further, given the policy debate on the impact and usefulness of government subsidies to soil conservation, our results suggest that soil conservation investments contribute to increase farmers’ output. Consequently, government support to appropriate soil conservation investments arrests soil erosion, prevents downstream externalities and assists farmers’ efforts to increase food production and food security.<p>
    Keywords: micro analysis of farm firms; resource management
    JEL: Q12 Q20
    Date: 2009–01–27
  9. By: Jensen, Jesper (Teca Training); F. Rutherford , Thomas (Swiss Federal Institute of Technology); G. Tarr, David (The World Bank)
    Abstract: This paper employs a 52-sector, small, open-economy computable general equilibrium model of the Tanzanian economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Tanzania. The model incorporates productivity effects in both goods and services markets endogenously, through a Dixit-Stiglitz framework. It summarizes policy notes on the key business service sectors that were prepared for this work, and estimates the ad valorem equivalent of barriers to foreign direct investment based on these policy notes and detailed questionnaires completed by specialists in Tanzania. The authors estimate that Tanzania will gain about 5.3 percent of the value of Tanzanian consumption in the medium run (or about 4.8 percent of gross domestic product) from a full reform package that also includes uniform tariffs. The estimated gains increase to about 16 percent of consumption in the long-run, steady-state model, where the impact on the accumulation of capital from an improvement in the productivity of capital is taken into account. Decomposition exercises reveal that the largest gains to Tanzania will derive from liberalization of costly regulatory barriers that are non-discriminatory in their impacts between Tanzanian and multinational service providers.
    Keywords: accounting; accurate estimate; aged; allocation; amount of money; baseline scenario; beneficiaries; beneficiary; Breast Cancer; budget constraint; calculation; central government; child care
    Date: 2008–12–01
  10. By: Beegle, Kathleen (The World Bank); De Weerdt, Joachim (EDI); Dercon, Stefan (Oxford University)
    Abstract: This study explores the extent to which migration has contributed to improved living standards of individuals in Tanzania. Using longitudinal data on individuals, the authors estimate the impact of migration on consumption growth between 1991 and 2004. The analysis addresses concerns about heterogeneity and unobservable factors correlated with both income changes and the decision to migrate. The findings show that migration adds 36 percentage points to consumption growth, during a period of considerable growth in consumption. These results are robust to numerous tests and alternative specifications. Unpacking the findings, the analysis finds that moving out of agriculture is correlated with much higher growth than staying in agriculture, although growth is always higher in any sector if one physically moves. Economic mobility is strongly linked to geographic mobility. The puzzle is why more people do not move if returns to geographic mobility are high. The evidence is consistent with models in which exit barriers are set by home communities (through social and family norms) that prevent migration of certain categories of people.
    Keywords: adult mortality; agricultural activities; agricultural produce; AIDS epidemic; basic needs; Business Ownership; Change in Consumption; consumption aggregate; consumption data; consumption expenditure
    Date: 2008–12–01
  11. By: Gani Aldashev; Jean-Marie Baland
    Abstract: We present a simple political economy model that explains two major puzzles of government policies to combat HIV/AIDS epidemic: the lack of policy response in many countries where the epidemic is massive and the reversal of the downward trend in HIV prevalence in the countries that have adopted early agressive prevention campaigns. The model builds on the assumption that the unaware citizens impose a negative externality on the aware by increasing the risk of contagion. Prevention campaigns raise awareness of the current generation, which then partially transmit this awareness to the next generation, thus creating political support for the next-period awareness campaigns. The economy has two steady-state equilibria: the "good" one (with high awareness and low prevalence) and the "bad" one (low awareness, high prevalence). The "good" equilibrium is fragile, i.e. a sufficiently large exogenous drop in HIV prevalence undermines the next-generation political support for campaigns and makes the economy drift away towards the "bad" equilibrium.
    Keywords: HIV/AIDS, voting, overlapping generations, awareness
    JEL: I18 H51
    Date: 2008
  12. By: Dethier, Jean-Jacques (The World Bank); Hirn, Maximilian (The World Bank); Straub, Stephane (Arqade, Toulouse School of Economics)
    Abstract: This paper surveys the recent literature which examines the impact of business climate variables on productivity and growth in developing countries using enterprise surveys. Comparable enterprise surveys today cover some 70,000 firms in over 100 countries around the world. The literature that has analyzed this data provides evidence that a good business climate drives growth by encouraging investment and higher productivity. Various infrastructure, finance, security, competition and regulation variables have been shown to significantly impact firm performance. Section 1 of this paper outlines the theoretical framework that underpins the investment climate literature. Section 2 describes the available datasets and surveys the key findings of the empirical literature, first macroeconomic and then microeconomic studies. Particular attention is paid to the robustness of the reported results. Section 3 highlights important econometric issues common to this literature and suggests a research agenda and possible improvements in survey design.
    Keywords: Investment Climate; Growth and Productivity; Economic Development
    JEL: L50 O12 O40
    Date: 2008–12–01
  13. By: Monica Nogara
    Abstract: Free, independent and hard-hitting media can play an important role in curbing corruption. Media in Uganda has enjoyed considerable freedom in this regard since Museveni came to power in 1986. The evolving power structure and a changing media landscape, however, have presented both challenges and opportunities for media’s watchdog role on corruption. This paper will explore how this environment defined such role between 1986 and 2006 during Museveni’s “no-party” rule. It argues that, although media won important battles to promote accountability in public offices, the regime’s complex power structure has consistently challenged their role as an instrument of public accountability.
    Keywords: corruption, media, press freedom, governance, rule of law
    JEL: D72 D73 D81 D82 D83 H11 K40 L82
    Date: 2009–01
  14. By: Cull, Robert (The World Bank); P. Spreng, Connor (The World Bank)
    Abstract: Profitability improvements after the privatization of a large state-owned bank might come at the expense of reduced access to financial services for some groups, especially the rural poor. The privatization of Tanzania's National Bank of Commerce provides a unique episode for studying this issue. The bank was split into the "new" National Bank of Commerce, a commercial bank that assumed most of the original bank's assets and liabilities, and the National Microfinance Bank, which assumed most of the branch network and the mandate to foster access to financial services. The new National Bank of Commerce's profitability and portfolio quality improved although credit growth was slow, in line with privatization experiences in other developing countries. Finding a buyer for the National Microfinance Bank proved very difficult, although after years under contract management by private banking consultants, Rabobank of the Netherlands emerged as a purchaser. Profitability has since improved and lending has slowly grown, while the share of non-performing loans remains low.
    Keywords: access to banking; access to banking services; access to financial services; access to services; Accounting; Agricultural Bank; asset allocation; asset portfolio; ATMs
    Date: 2008–12–01

This nep-afr issue is ©2009 by Quentin Wodon. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.