nep-afr New Economics Papers
on Africa
Issue of 2010‒03‒28
twenty-one papers chosen by
Quentin Wodon
World Bank

  1. Gates, hubs and urban primacy in Sub-Saharan Africa By Pholo Bala, Alain
  2. The Global Financial Crisis and Workers' Remittances to Africa: What's the Damage? By Anjali Garg; Adolfo Barajas; Ralph Chami; Connel Fullenkamp
  3. Growth, History, or Institutions? What Explains State Fragility in Sub-Saharan Africa By Graziella Bertocchi; Andrea Guerzoni
  4. Forecasting Monetary Rules in South Africa By Ruthira Naraidoo; Ivan Paya
  5. Trade trends from 2000 to 2008 for agriculture, forestry and fisheries of the Western Cape By Jacobs, Elne; Punt, Cecilia
  6. The Fragile Definition of State Fragility By Graziella Bertocchi; Andrea Guerzoni
  7. Policy note on pre-primary schooling: An empirical contribution to the 2009 Medium Term Strategic Framework By Martin Gustafsson
  8. An In-Sample and Out-of-Sample Empirical Investigation of the Nonlinearity in House Prices of South Africa By Mehmet Balcilar; Rangan Gupta; Zahra Shah
  9. South Africa’s economics of education: A stocktaking and an agenda for the way forward By Martin Gustafsson; Thabo Mabogoane
  10. Regional Power Shifts and Climate Knowledge Systems: South Africa as a Climate Power? By Babette Never
  11. Does Conflict Affect Preferences? Results from Field Experiments in Burundi By M. Voorst; E. Nillesen; Philip Verwimp; E. Bulte; R. Lensink; D. van Soest
  12. The Gender and Poverty Impacts of Trade Liberalization in Senegal By John Cockburn; Erwin Corong; Bernard Decaluwé; Ismaël Fofana; Véronique Robichaud
  13. Sensitivity of loan size to lending rates: Evidence from Ghana’s microfinance sector By Annim, Samuel Kobina
  14. Labor Migration and Social Networks Participation: Evidence from Southern Mozambique By Juan M. Gallegoy; Mariapia Mendola
  15. Opportunities and constraints in agriculture: A gendered analysis of cocoa production in Southern Cameroon By Wokia-azi N. Kumase; Herve Bisseleua; Stephan Klasen
  16. The Effects of the Coffee Trademarking Initiative and Starbucks Publicity on Export Prices of Ethiopian Coffee By Aslihan Arslan; Christopher P. Reicher
  17. Estimating Agroforestry's Effect on Productivity in Kenya: An Application of a Treatment Effects Model By Tsunehiro Otsuki
  18. Financial asset prices, linear and nonlinear policy rules. An In-sample assessment of the reaction function of the South African Reserve Bank By Ruthira Naraidoo; Kasai Ndahiriwe
  19. Effect of cropping policy on landowner reactions towards wildlife: a case of Naivasha area, Kenya By Mailu, Stephen; Kuloba, Bernard; Ruto, Eric; Nyangena, Wilfred
  20. A Model for Full-Fledged Inflation Targeting and Application to Ghana By Jihad Dagher; Ondra Kamenik; Ali Alichi; Kevin Clinton; Marshall Mills; Douglas Laxton
  21. Monetary Policy Transmission in Mauritius Using a VAR Analysis By Charalambos G. Tsangarides

  1. By: Pholo Bala, Alain (UniversitŽ catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))
    Keywords: economic geography, urban primacy, hub, developing countries
    JEL: D58 F12 F15 R12
    Date: 2009–05–01
  2. By: Anjali Garg; Adolfo Barajas; Ralph Chami; Connel Fullenkamp
    Abstract: Using data on the distribution of migrants from Africa, GDP growth forecasts for host countries, and after estimating remittance multipliers in recipient countries, this paper estimates the impact of the global economic crisis on African GDP via the remittance channel during 2009-2010. It forecasts remittance declines into African countries of between 3 and 14 percentage points, with migrants to Europe hardest hit while migrants within Africa relatively unaffected by the crisis. The estimated impact on GDP for relatively remittance-dependent countries is 2 percent for 2009, but will likely be short-lived, as host country income is projected to rise in 2010.
    Keywords: Africa , Capital flows , Cross country analysis , Economic forecasting , Economic growth , Financial crisis , Global Financial Crisis 2008-2009 , Migration , Workers remittances ,
    Date: 2010–01–29
  3. By: Graziella Bertocchi; Andrea Guerzoni
    Abstract: We explore the determinants of state fragility in sub-Saharan Africa. Controlling for a wide range of economic, demographic, geographic and istitutional regressors, we find that institutions, and in particular the civil liberties index and the number of revolutions, are the main determinants of fragility, even taking into account their potential endogeneity. Economic factors such as income growth and investment display a non robust impact after controlling for omitted variables and reverse causality. Colonial variables reflecting the history of the region display a marginal impact on fragility once institutions are accounted for.
    Keywords: State fragility, Africa, institutions, colonial history.
    JEL: O43 H11 N17
    Date: 2010–03
  4. By: Ruthira Naraidoo (Department of Economics, University of Pretoria); Ivan Paya (Department of Economics, Lancaster University)
    Abstract: This paper is the ?rst one to analyze the ability of linear and nonlinear monetary policy rule specifications as well as nonparametric and semiparametric models in forecasting the nominal interest rate setting that describes the South African Reserve Bank (SARB) policy decisions. We augment the traditional Taylor rule with indicators of asset prices in order to account for potential financial stability targets implicitly considered by the SARB. Using an in-sample period of 1986:01 to 2004:12, we compare the out-of-sample forecasting ability of the models over the period 2005:01 to 2008:12. Our results indicate that the semiparametric models perform particularly well relative to the Taylor rule models currently dominating the monetary policy literature, and that nonlinear Taylor rules improve their performance under the new monetary regime.
    Keywords: Monetary policy, Taylor rules, nonlinearity, nonparametric, semiparametric, forecasting
    JEL: C14 C51 C52 C53 E52 E58
    Date: 2010–03
  5. By: Jacobs, Elne; Punt, Cecilia
    Abstract: This paper aims to identify trade trends for primary products from the Western Cape agricultural, forestry and fisheries sector for the period 2000 until 2008. Annual trade data was received from the South African Revenue Service (SARS). The postal code information were used to identify from which province exports were sent or for which province the imports were destined. The postal code provided is that of the exporter or importer, and thus does not reflect the final destination in South Africa of imports or the origin (province) of our exports. Traded goods are classified using the Harmonised System (HS) that is used internationally. Results indicate that in South Africa and the Western Cape, the value of total imports are more than total exports, but in the agricultural sector of both South Africa and the Western Cape exports still dominate, i.e. South Africa and the Western Cape are still net exporters of agricultural products. For the Western Cape horticultural products, especially fruits, are at the top of the list of agricultural exports. The two main export countries for horticultural products are the Netherlands and the United Kingdom. Agricultural imports to the Western Cape are mostly field crops such as wheat, rice and tobacco, mainly from Argentina, Thailand and the United States of America. The values of exports and imports of fisheries and forestry from 2000 to 2008 indicate that the value of fish trade varies over time and the main trading partners also changes notable every year. The value of forestry trade is more stable than fish trade and since 2004, the main export country was Vietnam, but the United States dominates for imports. Nominal values are reported.
    Keywords: General Trade, Country and Industry Studies of Trade, International Relations/Trade, F10, F14,
    Date: 2009–11
  6. By: Graziella Bertocchi; Andrea Guerzoni
    Abstract: We investigates the link between fragility and economic development in sub-Saharan Africa over a yearly panel including 28 countries for the 1999-2004 period. Beside the conventional definition of fragility adopted by the OECD Development Assistance Committee, we introduce the more severe definition of extreme fragility. We show that only the latter exerts a significantly negative impact on economic development, once standard economic, demographic, and institutional regressors are accounted for. As a by-product of this investigation we produce up-to-date evidence on the growth performance of the area. We find a tendency to convergence and no influence of geographic and historical factors.
    Keywords: State fragility; growth; Africa; aid.
    JEL: O43 H11 N17
    Date: 2010–03
  7. By: Martin Gustafsson (Department of Economics, University of Stellenbosch)
    Abstract: Various data analysis approaches are used to gauge recent pre-primary enrolment trends in South Africa and the level of compliance with official age-grade norms in Grades R and 1. An analysis of the circumstances of Grade R learners finds that large class sizes are a problem. Two separate logit models are used to examine what factors are associated with better pre-school participation and whether participation in pre-school leads to better learning outcomes in primary school.
    Keywords: Pre-primary schooling, South Africa, Age-grade norms
    JEL: I21 I28
    Date: 2010
  8. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, North Cyprus,via Mersin 10, Turkey); Rangan Gupta (Department of Economics, University of Pretoria); Zahra Shah (Department of Economics, University of Pretoria)
    Abstract: This paper first tests if housing prices in the five segments of the South African housing market, namely, large-middle, medium-middle, small-middle, luxury and affordable, exhibits non-linearity based on smooth transition autoregressive (STAR) models estimated using quarterly data covering the period of 1970:Q2 to 2009:Q3. We find overwhelming evidence of non-linearity in these five segments based on in-sample evaluation of the linear and non-linear models. We then provide further support for non-linearity by comparing one- to four-quarters-ahead out-of-sample forecasts of the non-linear time series model with those of the classical and Bayesian versions of the linear autoregressive (AR) models for each of these segments, over an out-of-sample horizon of 2001:Q1 to 2009:Q3, using an in-sample period from 1970:Q2 to 2000:Q4. Our results indicate that barring the one-, two and four-step(s)-ahead forecasts of the small-middle-segment the non-linear model always outperforms the linear models.
    Keywords: Bayesian autoregressive models, Housing market, smooth transition autoregressive models, Forecast accuracy
    JEL: C12 C13 C22 C52 C53 R31
    Date: 2010–03
  9. By: Martin Gustafsson (Department of Economics, University of Stellenbosch); Thabo Mabogoane (Jet Education Services, Johannesburg)
    Abstract: The paper reviews some of the existing economics of education literature from the perspective of South Africa’s education policymaking needs. It also puts forward a suggested research agenda for future work. The review is arranged according to five key areas of analysis: rates of return, production functions, teacher incentives, benefit incidence, cross-country comparisons. Whilst benefit incidence analysis is able to demonstrate large improvements in the equity of public financing, cross-county comparisons reveal that not only is quality inequitably distributed, it is overall well below what the country’s level of development would predict. Production functions, especially if translated to cost effectiveness models, can point to important policy solutions. Rates of return are difficult for policymakers to interpret, and need to be viewed in the context of qualifications. Teacher incentives is a policy area that is badly in need of a better theoretical and empirical basis.
    Keywords: Economics of education, South Africa, education policy, rates of return, production functions, teacher incentives, benefit-incidence analysis
    JEL: I21 I28
    Date: 2010
  10. By: Babette Never (GIGA German Institute of Global and Area Studies)
    Abstract: In the international system, there has been a power shift towards regional powers, which can be illustrated by recent developments in climate governance. I argue that some of these regional powers are also climate powers, which benefit from an issue-specific power shift. The behavior and strategies of those climate powers are central for global climate governance. To analyze their strategies, a multi-level approach is required that captures the link between domestic climate governance and climate foreign policy. I develop such a concept of climate knowledge systems. It is based on Emanuel Adler’s theory of cognitive evolution and communities of practice. A pragmatist philosophy such as this that allows for mixed methods research is most suitable for analyzing the proposed connection between knowledge, practices and change. It also presents the key to an extended regional powers framework, leaving the somewhat artificial boundaries of international relations in climate governance behind. The concept of climate knowledge systems is empirically applied to South Africa with some early tentative results of an online expert survey, as well as the analysis of data of the Carbon Disclosure Project.
    Keywords: South Africa, regional powers, climate governance, communities of practice, knowledge systems, mixed methods
    Date: 2010–03
  11. By: M. Voorst; E. Nillesen; Philip Verwimp; E. Bulte; R. Lensink; D. van Soest
    Abstract: We use experimental data from 35 randomly selected communities in Burundi to examine the impact of exposure to conflict on social-, risk- and time preferences. These types of preferences are important as they determine people’s propensity to invest and their ability to overcome social dilemmas, so that changes therein foster or hinder economic growth. We find that conflict affects preferences. Individuals that have been exposed to greater levels of violence display more altruistic behavior towards their neighbors, are more risk seeking, and have higher discount rates. Adverse, but temporary, shocks can thus alter savings and investments decisions, and potentially have long-run consequences.
    Keywords: civil war, preferences, field experiments, Africa.
    Date: 2010
  12. By: John Cockburn; Erwin Corong; Bernard Decaluwé; Ismaël Fofana; Véronique Robichaud
    Abstract: Developing countries are deeply engaged in trade negotiations at the bilateral, regional and international (WTO) levels. As imports, exports and tariff duties all occupy an important part of their economies, far-reaching impacts on production, labor and capital markets, household incomes and, perhaps most importantly, economic growth will indubitably ensue. As men and women occupy very different roles in these economies, particularly in terms of the import and export orientation of the sectors in which they work, they will be affected very differently by these reforms. To anticipate these changes, a dynamic economy-wide model is developed with an application to Senegal. Whereas most similar existing studies consider the comparative static resource reallocation effects of trade reforms, ours is the first to focus on the growth effects (“dynamic gains from trade”), which are thought to be possibly much larger. The trade-productivity link is revealed to be the strongest growth channel, raising GDP by over three percentage points by the end of our 15 year simulation period. Trade liberalization is found to increase the gender wage gap in favor of men, especially among unskilled workers, as men are more active in export-oriented sectors such as cash crops and mining whereas women contribute more to import-competing sectors such as food crops. Furthermore, the ensuing growth effects further widen the over-all gender wage gap, as the productivity gains from increased openness are greatest in female-intensive sectors in which imports rise markedly. Thus, this suggests the need to implement policies aimed at increasing both unskilled and skilled women’s exposure in labor-intensive export industries, which is currently male dominated. A linked microsimulation analysis, based on a survey of Senegalese households, show that trade liberalization reduces poverty in Senegal, particularly in rural areas. While the fall in the relative wages of rural workers would initially lead us to believe that rural households would lose the most from trade liberalization, they are in fact compensated by greater consumer price savings, given that they consume more goods from the initially protected agricultural and agro-industrial sectors.
    Keywords: Senegal, Trade, Gender, Poverty, Growth
    JEL: C68 F17 F43 I32 J16 O24 O33 O55
    Date: 2010
  13. By: Annim, Samuel Kobina
    Abstract: Recent evidence from the microfinance industry reveals increase in sources of funding which anecdotally links to the profits of institutions. This phenomenon has evoked concerns for the responsiveness of the poor to credit market operational policies such as loan pricing. This paper integrates the poor’s characteristics into a loan size equation to estimate influence on interest rate stimulus. Using data from Ghana, we test the hypothesis of loan price inelasticity using quantile regression and the interaction procedure. The quantile regression shows pronounced variations in responsiveness of loan size to interest rate changes at different percentiles. In contrast to an inverse relationship depicted between the 20th and 40th quantiles, we observe positive and fairly flat curvatures at the extremes and around the median. Motivated by this finding, the interaction procedure is employed for household poverty scores and lending rates at varied statistic to identify differences in clients’ responsiveness. The semi-elasticity of loan amount responsiveness to a unit change in interest rate is more than proportionate and significant for the poorest group. In a broader context, the need for market segmentation based on socio-economic well-being is suggested in the paper in pursuance of the ‘win-win’ objective of poverty reduction and financial sustainability.
    Keywords: Interest rate; sensitivity; loan; size; poor; microfinance; Ghana
    JEL: I30 G29 G20
    Date: 2009–11
  14. By: Juan M. Gallegoy; Mariapia Mendola
    Abstract: This paper investigates how social networks in poor developing settings are af- fected if people migrate. By using an unique household survey from two southern regions in Mozambique, we test the role of labor mobility in shaping participation in groups and social networks by migrant sending households in village economies at origin. We find that households with successful migrants (i.e. those receiving either remittances or return migration) engage more in community based social networks. Our findings are robust to alternative definitions of social interaction and to endogeneity concerns suggesting that stable migration ties and higher income stability through remittances may decrease participation constraints and increase household commitment in cooperative arrangements in migrant-sending communities.
    Keywords: International Migration, Social Capital, Networks, Group Participation, Mozambique
    JEL: O17 O15 O12
    Date: 2010–02
  15. By: Wokia-azi N. Kumase (Georg-August University Goettingen); Herve Bisseleua (Georg-August University Goettingen); Stephan Klasen (Georg-August University Goettingen)
    Abstract: In this paper we examine gender differences in cocoa production in Cameroon using a survey of about 1000 cocoa producers in Southern Cameroon. We find that women farmers have access to land (of similar size to men), but through different mechanisms than men. They are strongly disadvantaged when it comes to access to extension services and marketing and control of proceeds. Despite these disadvantages, the productivity in terms of output per unit of land is similar to that of their male colleagues. Productivity analyses suggest that a slight disadvantage in productivity on female plots turns into a slight advantage when controlling for all the factors affecting productivity. The policy message from this is quite clear: Independent women farmers are a reality in Cameroon that need equal access to inputs and technologies, and support. If given equal opportunities, their productivity is at least as high as that of men.
    Keywords: Gender inequality; cocoa farming; Cameroon
    JEL: J71 Q12 O13
    Date: 2010–03–19
  16. By: Aslihan Arslan; Christopher P. Reicher
    Abstract: The Ethiopian government initiated the Ethiopian Coffee Trademarking and Licensing Initiative in 2004 for three coffee origins: Sidama, Yirgacheffe and Harar. Following a court case between Starbucks and the Ethiopian government regarding this initiative, Oxfam organized a publicity campaign. This paper evaluates the effect of these interventions on the export prices of trademarked Ethiopian coffees. We find that the prices of the trademarked coffees increased by about 10% following these interventions. The magnitude of this change is comparable with the farm gate prices reported in the literature; however, we cannot establish direct causation or observe the passthrough into farm gate prices
    Keywords: Trademarks, Coffee Prices, Public Campaign, Oxfam, Starbucks, Ethiopia
    JEL: O13 F14
    Date: 2010–03
  17. By: Tsunehiro Otsuki (Associate Professor, Osaka School of International Public Policy (OSIPP))
    Abstract: This study investigates the effects of adopting agroforestry and other soil conservation technologies (SCTs) on agricultural productivity in Kenya, using plot-level data on agricultural production. Using a treatment effects model, it is found that adopting agroforestry methods, as well as manure, chemical fertilizer, and terracing/trenching, increases total factor productivity (TFP) and land productivity. The TFP gain is estimated to be 40.7 percent from agroforestry. The average treatment effect for the adopters, however, turns slightly negative due to the negative self-selection effect, possibly because the agroforestry adopters tend to perceive adverse conditions on their land, which motivates them to adopt SCTs. In this sense, agroforestry and the other SCTs are preventive actions predominantly taken by farmers facing adverse conditions. The analysis demonstrates that both the simple mean comparison and the least squares estimation, due to their failure to reflect those complexities, could obscure the real benefits of SCTs.
    Keywords: soil conservation technology; sustainability and agricultural productivity; self-selected participation; treatment effects model
    JEL: O13 H43 Q57
    Date: 2010–03
  18. By: Ruthira Naraidoo (Department of Economics, University of Pretoria); Kasai Ndahiriwe (Department of Economics, University of Pretoria)
    Abstract: In this paper we provide an in-sample assessment of how the South African Reserve Bank (SARB) sets policy rate in the context of both linear and nonlinear Taylor type rule models of monetary policy. Given the controversial debate on whether central banks should target asset prices for economic stability, we investigate whether the SARB policy-makers pay close attention to asset and financial markets in its policy decisions. The main findings are that the nonlinear Taylor rule improves its performance with the advent of the financial crisis, providing the best description of in-sample SARB interest rate setting behaviour. The SARB policy-makers pay close attention to the financial conditions index when setting interest rate. The SARB’s response of monetary policy to inflation is greater during business cycle recessions with not much weight on output and seems to place high importance on inflationary pressures of output during boom periods. The 2007-2009 financial crisis witnesses an overall decreased reaction to inflation, output and financial conditions amidst increased economic uncertainty, with a shift from an asymmetric response to financial conditions over recessions to a more symmetric response irrespectively of the state of the economy.
    Keywords: monetary policy, nonlinearity, financial conditions index
    JEL: C51 C52 C53 E52 E58
    Date: 2010–03
  19. By: Mailu, Stephen; Kuloba, Bernard; Ruto, Eric; Nyangena, Wilfred
    Abstract: Wildlife policy in Kenya has in most part been protectionist with little incentives to private landowners, who host wildlife in their farms to participate in their conservation. However, in recognition of the role of incentives in conservation, the Kenya Wildlife Service (KWS) piloted a wildlife utilization policy in which organized landowners were allowed a cropping quota based on the number of wildlife present within their land. This study investigates the impact of such policy on human-wildlife conflicts using data compiled from a list of complaints lodged at the KWS warden’s office from farms around Lake Naivasha. Using this data, Poisson and negative binomial regression models are employed to estimate the effect of the wildlife cropping and policy and other factors on the frequency of wildlife damage incidences reported at the KWS offices. Results indicate that the policy may not have worked as intended since rather than reducing the number of conflict reports, it had an unexpected effect of increasing problem reports to KWS. The results are discussed and some recommendations provided.
    Keywords: Wildlife; Cropping; Count data regression; Buffalo; Landowners
    JEL: C16 D62 B40 Q28 C34
    Date: 2010–01–31
  20. By: Jihad Dagher; Ondra Kamenik; Ali Alichi; Kevin Clinton; Marshall Mills; Douglas Laxton
    Abstract: A model in which monetary policy pursues full-fledged inflation targeting adapts well to Ghana. Model features include: endogenous policy credibility; non-linearities in the inflation process; and a policy loss function that aims to minimize the variability of output and the interest rate, as well as deviations of inflation from the long-term low-inflation target. The optimal approach from initial high inflation to the ultimate target is gradual; and transitional inflation-reduction objectives are flexible. Over time, as policy earns credibility, expectations of inflation converge towards the long-run target, the output-inflation variability tradeoff improves, and optimal policy responses to shocks moderate.
    Keywords: Central banks , Disinflation , Economic models , External shocks , Ghana , Inflation rates , Inflation targeting , Low-income developing countries , Monetary policy , Public information , Transparency ,
    Date: 2010–01–29
  21. By: Charalambos G. Tsangarides
    Abstract: Applying commonly used vector autoregression (VAR) techniques, this paper investigates the transmission mechanism of monetary policy on output and prices for Mauritius, using data for 1999-2009. The results show that (i) an unexpected monetary policy tightening-an increase in the Bank of Mauritius policy interest rate-leads to a decline in prices and output but the effect on output is weaker; (ii) an unexpected decrease in the money supply or an unexpected increase in the nominal effective exchange rate result in a decrease in prices; and (iii) variations of the policy variables account for small a percentage of the fluctuations in output and prices. Taken together, these results suggest a rather weak monetary policy transmission mechanism. Finally, we find some differences in the transmission mechanism depending on whether core or headline consumer price index is used in the estimations.
    Keywords: Central bank policy , Consumer price indexes , Economic models , Interest rate increases , Mauritius , Monetary policy , Monetary policy instruments , Monetary transmission mechanism , Price adjustments ,
    Date: 2010–02–17

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