nep-afr New Economics Papers
on Africa
Issue of 2009‒02‒28
seventeen papers chosen by
Quentin Wodon
World Bank

  1. Transitory Economic Shocks and Civil Conflict By Ciccone, Antonio
  2. Inflation Dynamics and Food Prices in an Agricultural Economy: The Case of Ethiopia By Loening, Josef L.; Durevall, Dick; Ayalew Birru, Yohannes
  3. Monetary Policy and Inflation Modeling in a More Open Economy in South Africa By Aron, Janine; Muellbauer, John
  4. Modelling cross-gender and sexual relations: exploring the Soul Buddyz Edutainment Initiative in South Africa By Lara Cousins
  5. An empirical analysis of cellular demand in South Africa By Gasmi, Farid; Ivaldi, Marc; Recuero Virto, Laura
  6. Finding Missing Markets (and a disturbing epilogue): Evidence from an Export Crop Adoption and Marketing Intervention in Kenya By Ashraf, Nava; Giné, Xavier; Karlan, Dean S.
  7. Testing the 'Brain Gain' Hypothesis: MIcro Evidence from Cape Verde By Catia Batista, Aitor Lacuesta and Pedro C. Vicente
  8. Examining the Regional Aspect of Foreign Direct Investment to Developing Countries By Eva Rytter Sunesen
  9. Rules of Origin, Preferences and Diversification in Apparel: African Exports to the US and to the EU By de Melo, Jaime; Portugal-Pérez, Alberto
  10. Railway and Ports Organization in the Republic of South Africa and Turkey: The Integrator’s Paradise? By Louis S. Thompson
  11. Some Issues in Modeling and Forecasting Inflation in South Africa By Aron, Janine; Muellbauer, John
  12. Employment Laws in Developing Countries By Djankov, Simeon; Ramalho, Rita
  13. The dynamics of entrepreneurship in ICT: case of mobile phones downstream services in Kenya By Raphael Ngatia Kanothi
  14. Social Interactions, Ethnicity and Fertility in Kenya By Iyer, S.; Weeks, M.
  15. Exchange Rate Volatility and Export Trade in Nigeria: An Empirical Investigation By Aliyu, Shehu Usman Rano, PhD
  16. Peer Effects and the Impact of Tracking: Evidence from a Randomized Evaluation in Kenya By Duflo, Esther; Dupas, Pascaline; Kremer, Michael
  17. Poverty and Civil War: Revisiting the evidence By Djankov, Simeon; Reynal-Querol, Marta

  1. By: Ciccone, Antonio
    Abstract: I examine whether civil conflict is triggered by transitory negative economic shocks. My approach follows Miguel, Satyanath, and Sergenti (2004) in using rainfall as an exogenous source of economic shocks in Sub-Saharan African countries. The main difference is that my empirical specifications take into account that rainfall shocks are transitory. Failure to do so may lead to the conclusion that civil conflict is more likely to break out following droughts when the opposite is true.
    Keywords: Mean reversion; Rainfall; Transitory Shocks
    JEL: O0 P0 Q0
    Date: 2008–12
  2. By: Loening, Josef L. (World bank); Durevall, Dick (Department of Economics, School of Business, Economics and Law, Göteborg University); Ayalew Birru, Yohannes (University of Sussex)
    Abstract: Ethiopia has experienced a historically unprecedented increase in inflation, mainly driven by cereal price inflation, which is among the highest in Sub-Saharan Africa. Using monthly data over the past decade, we estimate error correction models to identify the relative importance of several factors contributing to overall inflation and its three major components, cereal prices, food prices and non-food prices. Our main finding is that, in the long run, domestic food and non-food prices are determined by the exchange rate and international food and goods prices. In the short to medium run, agricultural supply shocks and inflation inertia strongly affect domestic inflation, causing large deviations from long-run price trends. Money supply growth affects food price inflation in the short run, though excess money supply does not seem to drive inflation in the long run. Our results suggest a challenging time ahead for Ethiopia, with the need for a multipronged approach to fight inflation. Forecast scenarios suggest monetary and exchange rate policies need to take into account the cereal sector, as food staple growth is among the key determinants of inflation, assuming a decline in global commodity prices. Implementation of successful policies will be contingent on the availability of foreign exchange and the performance of agriculture.<p>
    Keywords: Agriculture; Cointegration analysis; Ethiopia; Exchange rate; Money demand; Food prices; Forecast; Inertia; Inflation
    JEL: E31 E37 E52 O55
    Date: 2009–02–23
  3. By: Aron, Janine; Muellbauer, John
    Abstract: South Africa in the 1990s became globally more integrated after years of isolation. Opening the trade and capital accounts gave impetus to a monetary policy regime change to inflation targeting from 2000, after a costly transitional period of monetary mismanagement with low policy transparency. Changes in openness can, however, disrupt the inflation forecasting on which targeting monetary policies depend. This chapter demonstrates how the central bank’s own producer price inflation equation in its core model can be improved by taking account of greater openness, using both innovative time-series openness measures and a more conventional measure. The model has a greatly improved fit and stability over longer samples when also including the real exchange rate and the interest rate differential (making explicit the exchange rate channel of monetary transmission) and asymmetric food price inflation. Moreover, there is a role for the level of the output gap rather than simply a short-run effect, as in the central bank’s model. This helps mitigate the arguments in current South African debate regarding the apparent unconcern of inflation targeting policy for the level of economic activity.
    Keywords: inflation dynamics; modelling producer prices; trade openness
    JEL: C22 E31 F13 F41
    Date: 2008–10
  4. By: Lara Cousins
    Abstract: HIV/AIDS among youth is a serious problem in South Africa. Cross-gender relations and associated constructs surrounding masculinity/femininity and sexuality are increasingly recognized as at the heart of the issue. Growing attention has thus been given to developing initiatives geared towards children and very young adolescents (VYAs), aimed at addressing attitudes and behaviours surrounding gender and sexuality. This paper explored the representations of ‘positive’ cross-gender relations, as well as associated constructs, in the Soul Buddyz edutainment initiative primarily geared towards 8-12 year-olds, and intended to provide “positive” role models for girls and boys.  Pertinent Soul Buddyz material was explored through methods of narrative and frame analysis, from a position informed by social constructionism and theoretical tenets of Michel Foucault. Findings were then situated within a broader framework, with reference made to the formative research undertaken for the development of Soul Buddyz, as well as other relevant studies concerning children and youth. The overarching aim of this paper was to raise questions in reference to HIV/AIDS prevention initiatives dealing with cross-gender relations and associated constructs, critical reflection upon these issues being considered as crucial within the context of the HIV/AIDS epidemic, and for potentially strengthening prevention initiatives.
    Keywords: HIV/AIDS, gender, sexuality, children, VYAs, youth, edutainment, discourse analysis
    Date: 2009
  5. By: Gasmi, Farid; Ivaldi, Marc; Recuero Virto, Laura
    Abstract: We analyze demand for prepaid cellular voice and short message service (SMS) in South Africa by means of a demand-and-supply structural model based on a multinomial specification fitted to a cross-sectional data set on Vodacom customers collected in 2005. We find that consumers are very sensitive to changes in prices, with higher price elasticities than those typically found in developed countries. Consumers attach a higher value to communications during peak hours but since these are priced highly, they are as much as twice more elastic than off-peak communications. In relative terms, demand for communications during peak hours is more elastic for urban than for rural consumers, while the reverse can be said about demand for off-peak hours. The highest valuations are those placed by rural consumers on working hour communications. A policy implication of our analysis is that while in terms of access cellular deployment in South Africa has gone a long way into bridging the gap between the ``first'' and ``second'' economies, in terms of usage if market organizations or regulatory institutions were to encourage further investment in network availability in rural areas this could be rewarding both for the firm and its rural customers.
    Keywords: Development economics; Differentiated product models; Telecommunications demand
    JEL: C31 D12 D40 L96 R00
    Date: 2009–02
  6. By: Ashraf, Nava; Giné, Xavier; Karlan, Dean S.
    Abstract: In much of the developing world, many farmers grow crops for local or personal consumption despite export options which appear to be more profitable. Thus many conjecture that one or several markets are missing. We report here on a randomized controlled trial conducted by DrumNet in Kenya that attempts to help farmers adopt and market export crops. DrumNet provides smallholder farmers with information about how to switch to export crops, makes in-kind loans for the purchase of the agricultural inputs, and provides marketing services by facilitating the transaction with exporters. The experimental evaluation design randomly assigns pre-existing farmer self-help groups to one of three groups: (1) a treatment group that receives all DrumNet services, (2) a treatment group that receives all DrumNet services except credit, or (3) a control group. After one year, DrumNet services led to an increase in production of export oriented crops and lower marketing costs; this translated into household income gains for new adopters. However, one year after the study ended, the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy European export requirements. DrumNet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans. The risk of such events may explain, at least partly, why many seemingly more profitable export crops are not adopted.
    Keywords: Export Crop; Field Experiment; Food safety standards
    JEL: F13 O12 Q17
    Date: 2009–01
  7. By: Catia Batista, Aitor Lacuesta and Pedro C. Vicente
    Abstract: Does emigration really drain human capital accumulation in origin countries? This paper explores a unique household survey purposely designed and conducted to answer this research question. We analyze the case of Cape Verde, a country with allegedly the highest ‘brain drain’ in Africa, despite a marked record of income and human capital growth in recent decades. Our micro data enables us to propose the first explicit test of ‘brain gain’ arguments according to which the prospects of own future migration can positively impact educational attainment. According to our results, a 10pp increase in the probability of own future migration improves the average probability of completing intermediate secondary schooling by 8pp. Our findings are robust to the choice of instruments and econometric model. Overall, we find that there may be substantial human capital gains from lowering migration barriers.
    Date: 2009–02–16
  8. By: Eva Rytter Sunesen (Department of Economics, University of Copenhagen)
    Abstract: This paper applies a general-to-specific analysis to detect regularities in the driving forces of foreign direct investment (FDI) that can explain why some regions are more attractive to foreign investors than others. The results suggest that regional differences in FDI inflows to African, Asian and Latin American countries can be fully explained by structural characteristics rather than fixed regional effects. The implication of this finding is that countries that are lagging behind other developing countries in attracting foreign capital have the opportunity to implement policies aimed at improving the investment climate for foreign investors. This also means that there is no African bias. Among a large number of return and risk variables applied in the empirical literature, growth and inflation turn out to be the only robust and significant FDI determinants across regions although the size of their impact varies.
    Keywords: foreign direct investment; Africa, Asia; Latin America; general-to-specifc
    JEL: F21 O57
    Date: 2009–02
  9. By: de Melo, Jaime; Portugal-Pérez, Alberto
    Abstract: The EU and the US offer similar preferential market access for apparel exports to a group of African countries. These agreements differ in their product-specific rules of origin (PSRO). While EBA and Cotonou require yarn to be woven into fabric and then made-up into apparel in the same country or in a country qualifying for cumulation (double transformation), AGOA grants a special regime (SR) to “lesser developed countries” allowing them the use of fabric from any origin and still meet the criteria for preferences (single transformation). Using several estimation methods, this paper contrasts export performance to the US and EU markets and attributes an increase in export volume of about 300% for the top seven beneficiaries of AGOA’s SR to differences in respective PSRO and also an increase in the number of products exported.
    Keywords: AGOA; EBA; Regional Integration; Rules of Origin
    JEL: F12 F13 F15
    Date: 2008–12
  10. By: Louis S. Thompson
    Abstract: This paper looks in detail at the cases of two countries that exhibit extreme cases of transport organization. In both countries, the railway and most of the ports are under unitary control, with essentially no regulation and only limited information available to assess behavior. If economies of scale are important, if the “integration” achieved by organizational unification is truly beneficial, and if competition is not needed to limit the behavior of the unified organizations, then these countries should be at the cutting edge of system performance, with high efficiency, low costs and excellent service. If the reverse is true, then they furnish at least a few data points for the analysis of the importance of diversity of organization and competition within the system.
    Date: 2009–02
  11. By: Aron, Janine; Muellbauer, John
    Abstract: Inflation targeting central banks will be hampered without good models to assist them to be forward-looking. Many current inflation models fail to forecast turning points adequately, because they miss key underlying long-run influences. The world is on the cusp of a dramatic turning point in inflation. If inflation falls rapidly, such models can underestimate the speed at which interest rates should fall, damaging growth. Our forecasting models for the new measure of producer price inflation suggest methodological lessons, and build in conflicting pressures on SA inflation from exchange rate depreciation, terms of trade shocks, collapsing oil, food and other commodity prices, and other shocks. Our US and SA forecasting models for consumer price inflation underline the methodological points, and suggest the usefulness of thinking about sectoral trends. Finally, we apply the sectoral approach to understanding the monetary policy implications of introducing a new CPI measure in SA that uses imputed rents rather than interest rates to capture housing costs.
    Keywords: forecasting inflation; homeowner costs in the CPI; PPI inflation; South Africa
    JEL: C22 C51 C52 C53 E31 E52 E58
    Date: 2009–02
  12. By: Djankov, Simeon; Ramalho, Rita
    Abstract: We survey the research on the effect of employment laws in developing countries, using papers published since 2004. The survey is further supported by cross-country correlation analyses. Both exercises show that developing countries with rigid employment laws tend to have larger informal sectors and higher unemployment, especially among young workers. A number of countries, especially in Eastern Europe and West Africa, have recently undergone significant reforms to make employment laws more flexible. Conversely, several countries in Latin America have made employment laws more rigid. These reforms are larger in magnitude than any reforms in developed countries and their study can produce new insights on the benefits of labor regulation.
    Keywords: employment regulation; India; Latin America
    JEL: J53 J54
    Date: 2008–12
  13. By: Raphael Ngatia Kanothi
    Abstract: The research paper explores the extent to which mobile phones downstream services, defined here as those provided using the existing connectivity, are generating opportunities for entrepreneurship development in Kenya. After identifying the services of mobile payphones, money transfer and phone repair, the paper analyses the micro-enterprises providing them and their contribution to income and employment creation. It shows that majority of the enterprises providing the services are survivalists and they are characterised by minimal barriers to entry and therefore stiff competition. Those in growth-oriented category are characterised by barriers to entry and specialisation. These enterprises have made a notable contribution to the concerned households and the economy in form of employment opportunities, income generation and linkage with other sectors. They directly supported over 25,000 households in addition to the extra staff employed in them. Across the board the incomes of the operators improved after engaging in the enterprises. The enterprises also created opportunities for women, youth, people with disabilities and those with low or no education. To the economy, payphones have contributed to increasing the mobile phones coverage to 75% of the country; money transfer services have provided cheaper financial transactions and means of sending emergency funds; while repair services have enabled low income earners to remain connected even when they could not afford to buy new phones. The paper therefore concludes that mobile phones downstream services have generated entrepreneurial opportunities to many as well as contributing positively to the goal of fighting poverty.
    Keywords: mobile phones downstream services, enterprises, employment, income and the poor.
    Date: 2009
  14. By: Iyer, S.; Weeks, M.
    Abstract: This paper examines, theoretically and empirically, the impact of reproductive externalities on fertility behaviour in Kenya. We examine this issue by identifying structural forms of social interaction operating across individuals belonging to different ethnic groups on the number of children ever born. We use the 1998 Demographic and Health Survey, and meteorological data on Kenya, to examine whether social interactions effects are important over and above an individual's characteristics in order to explain variations in fertility. In so doing, we conclude that social interactions are very important for the fertility behaviour of different ethnic groups in Kenya.
    Date: 2009–01
  15. By: Aliyu, Shehu Usman Rano, PhD
    Abstract: The paper seeks to quantitatively assess the impact of exchange rate volatility on non oil export flows in Nigeria. Theoretically, volatility-trade link is ambiguous, although a strand of studies reported inverse link between export flow and volatility. The paper employed fundamental analysis where the flow of non oil exports from the Nigerian economy is assumed to be predicated on fundamental variables: the naira exchange rate volatility, the US dollar volatility, Nigeria’s terms of trade (TOT) and index of openness (OPN). Empirical results showed presence of unit root at level, however, the null hypothesis of nonstationarity was rejected at first difference. Cointegration results revealed that a stable long run equilibrium relationship exists between non oil exports and the fundamental variables. Using quarterly observations for twenty years, vector cointegration estimate revealed that the naira exchange rate volatility decreased non oil exports by 3.65% while the same estimate for the US dollar volatility increased export of non oil in Nigeria by 5.2% in the year 2003. The paper recommends measures that would promote greater openness of the economy and exchange rate stability in the economy.
    Keywords: exchange rate volatility; non oil exports; terms of trade; index of openness; unit root and cointegration analysis.
    JEL: F10 F17
    Date: 2008–10–30
  16. By: Duflo, Esther; Dupas, Pascaline; Kremer, Michael
    Abstract: This paper provides experimental evidence on the impact of tracking primary school students by initial achievement. In the presence of positive spillover effects from academically proficient peers, tracking may be beneficial for strong students but hurt weaker ones. However, tracking may help everybody if heterogeneous classes make it difficult to teach at a level appropriate to most students. We test these competing claims using a randomized evaluation in Kenya. One hundred and twenty one primary schools which all had a single grade one class received funds to hire an extra teacher to split that class into two sections. In 60 randomly selected schools, students were randomly assigned to sections. In the remaining 61 schools, students were ranked by prior achievement (measured by their first term grades), and the top and bottom halves of the class were assigned to different sections. After 18 months, students in tracking schools scored 0.14 standard deviations higher than students in non-tracking schools, and this effect persisted one year after the program ended. Furthermore, students at all levels of the distribution benefited from tracking. A regression discontinuity analysis shows that in tracking schools scores of students near the median of the pre-test distribution score are independent of whether they were assigned to the top or bottom section. In contrast, in non-tracking schools we find that on average, students benefit from having academically stronger peers. This suggests that tracking was beneficial because it helped teachers focus their teaching to a level appropriate to most students in the class.
    Keywords: Development Economics; Education Economics; Primary School Tracking
    JEL: I21 O12
    Date: 2008–11
  17. By: Djankov, Simeon; Reynal-Querol, Marta
    Abstract: A popular "stylized fact" is that poverty is a main determinant of civil war: several scholars have interpreted the correlation between the two as evidence supporting this claim. In this paper, we find that the relationship between poverty and civil war is spurious, and is accounted for by historical phenomena that jointly determine income evolution and conflict. In particular, the statistical association between poverty, as proxied by income per capita, and civil wars disappears once we include country fixed effects. Also, using cross-section data for 1960-2005, we find that once historical variables like European settler mortality rates and the population density in 1500 are included in civil war regressions, poverty does not have an effect on civil wars. These results are confirmed using longer time series from 1825 to 2000.
    Keywords: Civil War; Income
    JEL: O11
    Date: 2008–10

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