nep-afr New Economics Papers
on Africa
Issue of 2009‒07‒28
fourteen papers chosen by
Quentin Wodon
World Bank

  1. Macroeconomic Fluctuations and Deposit Dollarization in Sub-Saharan Africa: Evidence from Panel Data By Yinusa, D. Olalekan
  2. The sensitivity of South African inflation expectations to surprises By Monique Reid
  3. Distributional Implications of Halving Poverty in South Africa By Tregenna, F.
  4. Prospects for BT Cotton In Mozambique. By Raul Pitoro; Tom Walker; David L. Tschirley; Scott Swinton; Duncan Boughton; Higgino de Marule
  5. Internal Migration of Blacks in South Africa: Self-selection and Brain Drain By Choe, Chung; Chrite, E. LaBrent
  6. The Black Man's Burden - The cost of colonization of French West Africa for French taxpayers By Elise Huillery
  7. Tax compliance perceptions and formalization of small businesses in south Africa By Coolidge, Jacqueline; Ilic, Domagoj
  9. Assessing the Effect of Foster-Children Supply on Biological Children Education Demand : Some Evidence from Cameroon. By Karine Marazyan
  10. Some Benefits of Reducing Inflation in South Africa By Rangan Gupta; Josine Uwilingiye
  11. Does AIDS-Related Mortality Reduce Per-Capita Household Income? Evidence from Rural Zambia By Toman Omar Mahmoud; Rainer Thiele
  12. Impact of Oil Price Shock and Exchange Rate Volatility on Economic Growth in Nigeria: An Empirical Investigation By Aliyu, Shehu Usman Rano , PhD
  13. The impact of the increase in food prices on child poverty and the policy response in Mali By Sami Bibi; John Cockburn; Luca Tiberti; Massa Coulibaly
  14. Capital humain et croissance : Evidences sur les données de pays Africains By Dorothée Boccanfuso; Luc Savard; Bernice E. Savy

  1. By: Yinusa, D. Olalekan
    Abstract: The role played by macroeconomic fluctuations in stimulating deposit dollarization in developing countries have been a subject of intense debate in the last few decades especially in Latin America and transition economies of Eastern Europe with little attention on African economies. Apart from this, most of the studies on African economies are country case studies with little scope for generalisation. This article examines the effect of macroeconomic fluctuations on deposit dollarization in 18 selected Sub-Saharan Africa for the period 1980 to 2004. Using the standard money demand model accounting for dollarization in small open economies, the article finds that inflation, expectations about exchange rate changes coupled with interaction between capital account restrictions and domestic inflation plays dominant roles in explaining deposit dollarization in Sub-Sahara Africa. Given the consequences of deposit dollarization on the vulnerability of the domestic banking system, lack of independent monetary policy and optimal exchange rate choices, the article concludes that macroeconomic instability must be adequately brought under control in other to reduce deposit dollarization in these economies.
    Keywords: Macroeconomic Fluctuations; Demand for Money; Deposit Dollarization; Panel Data and Sub-Saharan Africa
    JEL: E31 C21
    Date: 2009
  2. By: Monique Reid (Department of Economics, University of Stellenbosch)
    Abstract: Price stability is widely recognised as the primary goal of modern monetary policy, and the management of private sector inflation expectations has become an essential channel through which this goal is achieved. This evaluation aims to improve the understanding of how the sensitivity of private sector inflation expectations to macroeconomic surprises in South Africa compares internationally, as this provides an indication of the contribution of monetary policy in South Africa to anchoring inflation expectations. If a central bank is credible, the financial markets should react less sensitively to macroeconomics surprises, because they trust the central bank to manage these incidents and achieve the objectives they communicated over the medium to long term. In this paper, the methodology of Gurkaynack, Sack and Swanson (2005a) is adopted in order to measure the sensitivity of South African inflation expectations to surprises. A comparison of South Africa’s results with those of countries in the original studies supports the contention that the SARB (South African Reserve Bank) has encouraged inflation expectations to be relatively insensitive to macroeconomic surprises, and offers support for the inflation targeting framework as a means to help anchor inflation expectations.
    Keywords: South Africa, Inflation targeting, Macroeconomic surprises, Sensitivity of inflation expectations
    JEL: E31 E52 E58
    Date: 2009
  3. By: Tregenna, F.
    Abstract: The South African government has set as a policy objective the halving of poverty by 2014, although the meaning of this goal has not yet been defined. This article frames government’s stated target of halving poverty by 2014 in terms of specific measures of the poverty gap and poverty headcount ratio, using newly released income and expenditure survey data. With the poverty line as defined here, approximately half the South African population falls below the poverty line. Despite this, the aggregate poverty gap is surprisingly only about 3% of GDP. Projections of poverty in 2014 under various growth scenarios indicate that growth alone will be insufficient to halve poverty by that time, and that any worsening of distribution will put the target of halving poverty by 2014 beyond reach. However, projecting the effects of a range of growth and distributional scenarios indicate that halving poverty appears feasible with moderate growth rates and fairly mild pro-poor distributional change. The results are indicative as to the scale of distributional changes necessary to halve poverty under various growth scenarios.
    Keywords: income distribution, poverty, inequality, South Africa
    JEL: D30 D31 I32
    Date: 2009–06–09
  4. By: Raul Pitoro; Tom Walker; David L. Tschirley; Scott Swinton; Duncan Boughton; Higgino de Marule
    Abstract: ique’s cotton sector is very important to the economy and to poverty reduction in the rural sector. Cotton production in Mozambique is characterized by low levels of productivity, low prices and low returns. Cotton farmers in Mozambique are often no better off than their neighbors who do not grow cotton. Not surprisingly, many cotton farmers have switched to other crops such as sesame. But the Government of Mozambique and the National Cotton Institute (INE) are committed to improving the profitability of the cotton sector and encouraging new investments by international companies. Looking at cotton production globally, the most important innovation in recent years has been the introduction of transgenic Bt cotton. Bt cotton varieties have built-in resistance to bollworm, a devastating insect pest. Cotton production in countries that have introduced Bt varieties, like India, China and the United States, has soared. Yet no country in Sub-Saharan Africa (SSA), with the exception of South Africa, has yet introduced Bt cotton. Burkina Faso is at an advanced stage of testing. Mozambique should not ignore the single most important technical advance in rain-fed cotton production in the past decade. What are the potential benefits and costs to Mozambique from the introduction of Bt cotton? Would it be profitable for farmers to adopt? What would be the effects of adoption on poverty? If the results are potentially profitable what steps need to be taken and by who to realize the potential gains? This working paper answers these questions by conducting first a detailed review of the experience of other countries who have adopted Bt cotton, and then an economic ‘experiment’ to estimate the expected profitability of cotton production based on farm-level cotton pest control and crop management data.
    Keywords: bio technology, cotton, Mozambique, Africa
    JEL: Q16
    Date: 2009–06
  5. By: Choe, Chung (CEPS/INSTEAD); Chrite, E. LaBrent (University of Arizona)
    Abstract: Migrations historically have led to fears of “brain drain” from the sending regions because many studies show that the more highly skilled and motivated people are more likely to migrate. South Africa provides a natural testing ground for the study of brain drains because the Apartheid system, which ended in the early 1990s, had long constrained the locational choices of black migrants of all skill levels. As apartheid was being dismantled, new opportunities for movement opened up to black workers, leading to a surge in internal migration. We first analyze whether migration patterns of Black South Africans during the period 1992 to 1996 match the predictions of the two seminal papers, Roy (1951) and Sjaastad (1962), where individuals are hypothesized to be income-maximizers. The results from conditional logit regressions on individual choices among 318 locations show that they do. Individuals prefer localities with higher expected log wages regardless of their educations and skills. More importantly, workers with at least some matriculation tend to favor areas where a higher share of the population attended high school. In contrast, workers who did not attend high school find such areas less attractive. Over the study period, brain drain arose among blacks within South Africa: the share of high-educated residents in areas with high shares of high schooling increased.
    Keywords: Internal Migration; South Africa ; Self-selection ; Brain Drain
    JEL: D31 J61 O15
    Date: 2009–07
  6. By: Elise Huillery
    Abstract: Was colonization very costly for the metropole? This view has been widely accepted among French historians even though little empirical evidence has been provided. Using original data from the colonial budgets of French West Africa (AOF) this paper provides new insights into the actual colonial public funding in this part of the French empire. Comparing the financial transfers from the metropole to AOF to total metropolitan expenses reveals that the cost of colonization of the AOF for French taxpayers was extremely low: French subsidies to the AOF represented on average 0.007 percent of total metropolitan expenses. From the AOF side financial transfers from the metropole were not that beneficiary since French subsidies represented on average 0.4 percent of total local revenue. Including the public loans and cash advances from the metropole does not change this general pattern. West Africans therefore funded most colonial public investments which reveal to be very small. One reason for the scarcity of public investments is the cost of French civil servants serving in the colonies which turned out to be a considerable burden for Africans: French government officials alone represented 20 percent of total local public expenses.
    Date: 2009
  7. By: Coolidge, Jacqueline; Ilic, Domagoj
    Abstract: This paper is based on large-scale surveys of formal and informal small businesses in South Africa, including questions about their experiences and perceptions about tax compliance, tax morale, and related variables. The survey findings suggest that formalization is more likely to take place in urban areas, involving relatively larger firms, and those who already use proper bookkeeping. Informal firms who said they were likely to register for tax in the near future were more likely than other informal firms to report higher satisfaction with government services, and to believe most businesses pay their taxes. The most-cited advantages of being registered for tax included better access to government services, better access to financing, and better opportunities for growth.
    Keywords: Taxation&Subsidies,Debt Markets,Emerging Markets,Tax Law,Fiscal Adjustment
    Date: 2009–07–01
  8. By: Witt, Rudolf; Waibel, Hermann
    Abstract: Climate risk is particularly burdensome to small-scale farmers in developing countries due to heavy dependence on natural resources, limited and erratic rainfall with high inter- and intra-annual variability, and other natural calamities. Numerous studies on climate change suggest that climate variability is expected to increase in the next few decades, and that it is likely to be severe for tropical areas. For the design of better intervention strategies that are capable to stabilize the incomes of the poor and decrease vulnerability, it is mandatory to have a good understanding of the livelihoods of rural populations, and the risks they are facing.<br />This paper presents an approach to measuring climate risk and its impact on livelihood outcomes in fishery-dependent communities in the ya\'eres floodplain (Far North Province of Cameroon) by applying portfolio theory and stochastic dominance rules. The focus of the analysis is put on the question, how portfolio decisions of households affect income and risk in different production systems. Assuming possible future scenarios we can derive approximate predictions of the effects of climate change and rural development interventions on income and the "riskiness" of different activity portfolios. The results suggest that the diversification effect in the study area is limited due to high correlation of income flows from different activities. However, we show that development intervention strategies, which particularly aim at changing the covariation structure of income flows, are most successful in reducing risk, and potentially increasing income.
    Keywords: Climate risk, agricultural diversification, portfolio theory, Sub Saharan Africa
    JEL: G11 Q12 Q54
    Date: 2009–07
  9. By: Karine Marazyan (Centre d'Economie de la Sorbonne)
    Abstract: In Cameroun, around 18 percent of children aged between 10-14 years old grow up within a sibship extended to host one (or more) foster-child. This proportion is similar in other African countries and in particular West African ones. This paper aims at estimating the effect of foster-children supply on biological children education demand of host parents in Cameroon. To address the endogeneity of foster-children supply, we estimate both decision within a recursive bivariate probit framework and use, as our identifying variable, the father's birth order among his brothers. Indeed, in patrilineal societies as in Cameroon, kinship rules involve children to be hosted by brothers of the male kin group, and more likely by the eldest. Using data from the demographic and health survey of Cameroon (2004), a dataset uniquely suitable for our purpose since information on the father's birth order are available, we find that children hosting school-age foster-relatives have a significant lower probability to attain their basic level of education relative to those who do not. This suggests that households hosting school-age foster-relatives due to kinship rules suffer from liquidity constraints preventing them from educating further their biological children. Through this result, we highlight the importance of the motive underlying child fostering to determine its spillover effects.
    Keywords: Households structure, child fostering, extended sibship, Cameroon.
    JEL: I2 J1 O1
    Date: 2009–06
  10. By: Rangan Gupta (Department of Economics, University of Pretoria); Josine Uwilingiye (Department of Economics, University of Pretoria)
    Abstract: This paper evaluates the welfare gain from reducing inflation permanently from two percent to price stability and compares it with the output cost associated with this transition. The paper emphasizes the distortions caused by the interaction of inflation and capital income taxation, in calculating the gain from moving to a zero rate of inflation. Though the annual deadweight loss of a two percent inflation rate is 0.20 percent of GDP - a relatively small number when compared to the literature, since the real gain from shifting to price stability grows in perpetuity at the rate of growth of GDP, the present value is a substantial multiple of the annual welfare gain. Calculations reveal a present value gain of 13.33 percent of GDP. Since the corresponding one-off output cost of moving from two percent inflation to price stability is 0.034 percent of GDP, the gain outweighs the cost by an overwhelming margin.
    Keywords: Inflation, Non-Indexed Tax System, Welfare Cost
    JEL: P34 H21 E31
    Date: 2009–07
  11. By: Toman Omar Mahmoud; Rainer Thiele
    Abstract: This paper evaluates the effect of AIDS-related mortality on per-capita incomes of surviving household members, using a large nationally representative sample of rural households from Zambia. To minimize selection bias that may arise because AIDS is likely to be the endogenous outcome of individual behavior, we employ a difference-in-difference propensity score matching estimator. We find that the death of a prime-age member has no significant impact on per-capita household income. This result continues to hold when we control for spillover effects by excluding households from the control group if members departed or joined for reasons related to AIDS. A likely explanation for this finding is that surviving household members pursue a mix of income and demographic coping strategies that prevents income losses in the short to medium run
    Keywords: HIV/AIDS, prime-age mortality, per adult equivalent income, difference-in-difference, propensity score matching, spillovers, Zambia
    JEL: I31 J19 C14 C23
    Date: 2009–07
  12. By: Aliyu, Shehu Usman Rano , PhD
    Abstract: This paper seeks to assess the impact of oil price shock and real exchange rate volatility on real economic growth in Nigeria on the basis of quarterly data from 1986Q1 to 2007Q4. The empirical analysis starts by analyzing the time series properties of the data which is followed by examining the nature of causality among the variables. Furthermore, the Johansen VAR-based cointegration technique is applied to examine the sensitivity of real economic growth to changes in oil prices and real exchange rate volatility in the long-run while the short run dynamics was checked using a vector error correction model. Results from ADF and PP tests show evidence of unit root in the data and Granger pairwise causality test revealed unidirectional causality from oil prices to real GDP and bidirectional causality from real exchange rate to real GDP and vice versa. Findings further show that oil price shock and appreciation in the level of exchange rate exert positive impact on real economic growth in Nigeria. The paper recommends greater diversification of the economy through investment in key productive sectors of the economy to guard against the vicissitude of oil price shock and exchange rate volatility.
    Keywords: Cointegration; Granger Causality; Oil price shock; Exchange Rate Volatility; VECM
    JEL: F40 F41 F43
    Date: 2009–05–03
  13. By: Sami Bibi; John Cockburn; Luca Tiberti; Massa Coulibaly
    Abstract: Since 2006, Mali has experienced the full effects of the global food crisis, with price increases of up to 67%. This study presents simulations of the impacts of this crisis and a number of policy responses with respect to the welfare of children. The impacts are analyzed in terms of monetary (food) poverty, nutrition, education, child labor and access to health services of children. According to simulations, food poverty among children would have increased from 41% to 51%, with a corresponding rise in caloric insufficiency from 32% to 40%, while the impacts on school participation, work and access to health services would have been relatively weak.
    Keywords: child education; child health; child labour; child poverty; economic crisis; food crises; nutrition;
    JEL: E39
    Date: 2009
  14. By: Dorothée Boccanfuso (GREDI, Faculte d'administration, Université de Sherbrooke); Luc Savard (GREDI, Faculte d'administration, Université de Sherbrooke); Bernice E. Savy (GREDI, Faculte d'administration, Université de Sherbrooke)
    Abstract: La théorie économique a pendant longtemps admis une relation positive entre le capital humain et la croissance économique (Smith, 1776 ; Becker, 1964) qui sera remise en cause à la fin des années 90 dans plusieurs études (Caselli et al., 1996 ; Pritchett, 2001). Parmi les faiblesses identifiées par ces auteurs, la critique relative à l’utilisation du nombre moyen d’années d’étude comme proxy utilisé pour évaluer le stock de capital humain est souvent avancée. La non prise en considération des rendements décroissants de l’éducation et des aspects qualitatifs du stock de capital humain sont les deux principales critiques évoquées. Le but de ce travail est d’apporter des corrections aux insuffisances relevées dans la littérature quant au proxy usuel du capital humain, en proposant de nouveaux indicateurs. Nous avons construit un indicateur composite du capital humain (ACP) permettant d’intégrer les aspects qualitatifs et utilisé l’indicateur du stock de capital humain proposé par Mincer (1974) pour prendre en considération les rendements décroissants. Ces indicateurs sont ensuite utilisés pour apprécier la contribution du capital humain sur le niveau et la variation du PIB per capita de 22 pays africains sur la période de 1970 à 2000, en utilisant la méthodologie proposée par Islam (1995). Les résultats montrent que la prise en compte des aspects qualitatifs et des rendements décroissants du capital humain, a permis de retrouver son impact positif et significatif sur le processus de croissance économique. Les données révèlent également un processus de convergence conditionnelle pour les pays étudiés.
    Keywords: croissance économique, convergence, capital humain, Afrique
    JEL: O18 O47 O55
    Date: 2009–07–07

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