nep-afr New Economics Papers
on Africa
Issue of 2010‒05‒15
eleven papers chosen by
Quentin Wodon
World Bank

  1. The Economic Origins of Twentieth Century Decolonisation in West Africa By J.A. Agbor
  2. Oil revenues for public investment in Africa: targeting urban or rural areas? By Marcus Böhme; Clemens Breisinger; Rainer Schweickert; Manfred Wiebelt
  3. A Comparison of Inflation Expectations and Inflation Credibility in South Africa: Results from Survey Data By Jannie Rossouw; Vishnu Padayachee; Adél Bosch
  4. Trends in South-South Cooperation By Michelle L. Chang
  5. How Does Colonial Origin Matter for Economic Performance in sub-Saharan Africa? By J.A. Agbor; J. W. Fedderke; N. Viegi
  6. Should Central Banks of Small Open Economies Respond to Exchange Rate Fluctuations? The Case of South Africa By Sami Alpanda; Kevin Kotze; Geoffrey Woglom
  7. Is Informality Bad? - Evidence from Brazil, Mexico and South Africa By Olivier Bargain; Prudence Kwenda
  8. Water Supply in Rural Ghana: Do Women Benefit? By Joana Costa; Degol Hailu; Elydia Silva; Raquel Tsukada
  9. Assessing Administrative Capacity and Costs of Cash Transfer Schemes in Zambia ? Implications for Rollout By Dennis Kaputo Chiwele
  10. Child Morbidity and Camp Decongestion in Post-war Uganda By Carlos Bozzoli; Tilman Brück
  11. The Impact of Central Bank's intervention in the foreign exchange market on the Exchange Rate: The case of Zambia (1995-2008) By Mwansa, Katwamba

  1. By: J.A. Agbor
    Abstract: This paper argues that the pattern of decolonisation in West Africa was a function of the nature of human capital transfers from the colonisers to the indigenous elites of the former colonies. Underpinning the nature of these human capital transfers is the colonial educational ideology. Where this ideology emphasized the notion of "assimilation", the system generally tended to produce elites that depended highly on the coloniser for their livelihood, hence necessitating a continuation of the imperial relationship even after independence was granted. On the contrary, where the ideology emphasized the "strengthening of the solid elements" of the country-side, the system tended to produce a bunch of elites that were quite independent of the coloniser and consequently had little to lose from a disruption of the imperial relationship at independence. The model raises several predictions based on a single assumption on the nature of the nationalist elite. The paper's contribution, is in providing a framework for understanding the different paths of decolonisation in Africa in general, but more specifically in the British and French West African empires, an approach which unites both the Eurocentric and Afrocentric perspectives.
    Keywords: Decolonisation, Human Capital Transfers, Eurocentrism, Afrocentrism, West Africa
    JEL: I21
    Date: 2010
  2. By: Marcus Böhme; Clemens Breisinger; Rainer Schweickert; Manfred Wiebelt
    Abstract: This paper investigates the effects of oil financed public investment on poverty using a dynamic multisectoral general equilibrium model featuring inter-temporal productivity spillovers, which may exhibit a sector-specific and regional bias. In general, the results bear out the expectation that a surge of oil revenues leads to a real appreciation, distorting incentives which favor nontradable activities over export agriculture and manufacturing thereby increasing rural and national poverty. Whereas this result is familiar from other recent studies, the simulations show that beyond the short run, when conventional demand-side Dutch disease effects are present, the relationship between resource-rent flows and real exchange rates, output growth, and poverty is less straightforward than simple models of the "resource curse" suggest. Taking Ghana as a stylized agriculture-based economy with poverty most pronounced in a region with home biased agricultural production, a policy mix of smoothing the real exchange rate shock and an allocation of infrastructure spending in rural areas seems to be the most promising public investment strategy to enhance growth and reduce poverty
    Keywords: oil revenue, public investment, productivity, Africa, agricultural development, poverty
    JEL: H4 O5 Q3
    Date: 2010–05
  3. By: Jannie Rossouw; Vishnu Padayachee; Adél Bosch
    Abstract: This paper reports a comparison of South African household inflation expectations and inflation credibility surveys undertaken in 2006 and 2008. The objective is to test for possible feed-through between inflating credibility and inflation expectations. It supplements similar earlier research that focused only on the 2006 survey results. The single most important difference between the survey results of 2006 and 2008 is that female and male respondents reported inflation expectations at the same level in 2006, while female respondents expected higher inflation than male respondents in the 2008 inflation expectations survey. More periodic survey data will be required for developing final conclusions on the possibility of feed-through effects. A very large percentage of respondents in the inflation credibility surveys indicate that they 'don't know' whether the historic rate of inflation is an accurate indication of price increases. It will be necessary to reconsider the structure of credibility surveys to increase the number of respondents providing views on the accuracy of historic inflation data.
    Keywords: Inflation; inflation credibility; inflation expecttaions; inflation surveys; multinomial analysis
    JEL: E31 E52 E58
    Date: 2010
  4. By: Michelle L. Chang (University of California, Berkeley)
    Abstract: South-South Cooperation (SSC) is being impacted by the emergence of economic behemoths?India, Brazil, China and South Africa. In 2006 alone, about US$3 billion in development assistance came from Southern contributors (Johnson, Versailles and Martin, 2008). What comes next? What are the trends and pressing demands in SSC?
    Keywords: Trends in South-South Cooperation
    Date: 2010–02
  5. By: J.A. Agbor; J. W. Fedderke; N. Viegi
    Abstract: This paper investigates the channels through which colonial origin affects economic outcomes in sub-Saharan Africa (SSA). It focuses on four key channels of transmission namely, human capital, trade openness, market distortion and selection bias. In contrast with previous studies where only initial conditions at independence were held to influence the subsequent growth path, the methodology that we apply in this paper combines (1) the pre-colonisation initial conditions, (2) the initial conditions at independence and (3) the subsequent post-colonial changes in explaining income differences amongst former SSA colonies. Our sample comprises of 38 SSA countries studied over the period 1960-2000, and we use pooled OLS and Hausman-Taylor estimation techniques in a panel framework. The results suggest that former British colonies have had marginally higher income levels than former French colonies, and this is attributable to the legacy of British colonisation in trade openness and human capital. We do not find robust evidence in support of the market distortion and selection bias channels. Besides highlighting the importance of the trade openness channel, the study is also the first, to the best of our knowledge, to simultaneously examine a range of feasible transmission channels between colonial origin and economic growth performance.
    Keywords: Colonial Origin, Human Capital, Institutions, Hausman-Taylor, sub-Saharan Africa
    JEL: F54 O47 I20 N17
    Date: 2010
  6. By: Sami Alpanda; Kevin Kotze; Geoffrey Woglom
    Abstract: We estimate a New Keynesian small open economy DSGE model for South Africa, using Bayesian techniques. The model features imperfect competition, incomplete asset markets, partial exchange rate pass-through, and other commonly used nominal and real rigidities, such as sticky prices, price indexation and habit formation. We study the effects of various shocks on macroeconomic variables, and calculate the optimal Taylor rule coefficients using a loss function for the central bank. We find that the optimal Taylor rule places a heavier weight on inflation and output than the estimated Taylor rule, but almost no weight on the depreciation of currency.
    Keywords: optimal monetary policy, small open economy, Bayesian estimation
    JEL: F41 E52
    Date: 2010
  7. By: Olivier Bargain (University College Dublin); Prudence Kwenda (University College Dublin)
    Abstract: The informal sector plays an important role in the functioning of labor markets in emerging economies. To characterize better this highly heterogeneous sector, we conduct a distributional analysis of the earnings gap between informal and formal employment in Brazil, Mexico and South Africa, distinguishing between dependent and independent workers. For each country, we use rich panel data to estimate fixed effects quantile regressions to control for (time-invariant) unobserved heterogeneity. The dual nature of the informal sector emerges from our results. In the high-tier segment, self-employed workers receive a significant earnings premium that may compensate the benefits obtained in formal jobs. In the lower end of the earnings distribution, both informal wage earners and independent (own account) workers face significant earnings penalties vis-à-vis the formal sector. Yet the dual structure is not balanced in the same way in all three countries. Most of the self-employment carries a premium in Mexico. In contrast, the upper-tier segment is marginal in South Africa, and informal workers, both dependent and independent, form a largely penalized group. More consistent with the competitive view, earnings differentials are small at all levels in Brazil.
    Keywords: self-employed, salary work, informal sector, earnings differential, quantile regression, fixed effects model
    Date: 2010–01–29
  8. By: Joana Costa (International Poverty Centre); Degol Hailu (UNDP SURF); Elydia Silva (International Poverty Centre); Raquel Tsukada (International Policy Centre for Inclusive Growth)
    Abstract: Women?s income poverty in developing countries is usually associated with time poverty. The time that women spend on domestic chores represents significant forgone income. Infrastructure provision potentially reduces women?s time burden. The saving includes time spent on collecting, loading and purifying water. That saving would enable women to engage in remunerated activities, dedicate more time to pursuing education, or have a little leisure. In this One Pager, we investigate the impact of water provision on women?s time allocation in rural Ghana.
    Keywords: Water Supply in Rural Ghana: Do Women Benefit?
    Date: 2009–12
  9. By: Dennis Kaputo Chiwele (RuralNet Associates, Limited)
    Abstract: The Ministry of Community Development and Social Services (MCDSS) has taken the decision to rollout in 2009 a national social cash transfer scheme (SCTS) to cover the whole country by 2012. Thus far, social cash transfer schemes are being piloted in five districts in Southern and Eastern Provinces. The schemes are using structures created for the implementation of the Public Welfare Assistance System (PWAS) which rise from community level all the way to the national level. The adoption of pilot SCTS in Zambia follows the growing acceptance of social cash transfers as a means for assisting extremely poor households. Partly, this is due to the positive impact of conditional cash transfers in Latin America with respect to school enrolments, improved health and reduction in poverty levels for participating households. An evaluation of the Kalomo SCTS revealed a number of achievements with respect to impact on the beneficiaries including a rise in self-esteem and confidence among beneficiaries, reduced incidence of begging, increased food consumption, increased asset ownership and positive impacts for the local economy. Field work for this assessment although not focused on assessing impacts noted qualitative evidence of these findings. Implementation of pilot schemes started in 2004 with the Kalomo SCTS followed by one in 2005 in Kazungula, 2006 in Chipata and in 2007 in Monze and Katete. The schemes have been implemented with some variation so that they ?generate information on the feasibility, costs and benefits and negative impacts of a Social Cash Transfer Scheme?? (Zulu and Schuring, May 2007, p.1). Each of the pilot scheme has been designed to form a part of the learning agenda that would utilise lessons towards the design of a national social cash transfer. It is also being assessed as to the extent to which the PWAS structures are able to accommodate social cash transfer along existing social welfare activities.
    Keywords: Assessing Administrative Capacity and Costs of Cash Transfer Schemes in Zambia ? Implications for Rollout
    Date: 2010–02
  10. By: Carlos Bozzoli (DIW Berlin); Tilman Brück (DIW Berlin)
    Abstract: Conflict related displacement affects millions of families throughout the world. Very little is known about the determinants of health outcomes in the period immediately after a cease-fire is agreed, in which currently displaced people living in camps consider returning to their place of origin. In this paper, we study the effects of war and displacement on the health of children, using morbidity data collected as part of a large household survey from post-war northern Uganda in 2007. We combine this dataset with geo-coded conflict event data at the individual level to overcome the challenges of selection bias and endogeneity arising from households choosing their location in part based on their health status. This methodological concern is confirmed in our analysis. We then estimate the determinants of child morbidity (proxied by various health indicators) in an instrumental variables multivariate model, where conflict intensity at place of birth of the head of household is used as an instrument. We find that while children in IDP camps and in returnee locations exhibit the same mean morbidity rates, IDP camp residency almost doubles morbidity while poor access to safe drinking water in return locations counteracts the positive health effects of camp decongestion. Our results point to the importance of overcrowding and poor cooking technologies in IDP camps for worsening morbidity in children and the need to provide better sanitation and drinking water access in return locations to further improve the health status of conflict-affected children. Better data and analysis in early post-war periods can help to balance public health interventions, thereby strengthening the peace process.
    Keywords: Violent conflict, health, displacement, Uganda
    Date: 2010
  11. By: Mwansa, Katwamba
    Abstract: The central bank of Zambia called Bank of Zambia (BOZ) has, like many other central banks in both developing and developed economies, been from time to time intervening in the foreign exchange market by either purchasing or selling foreign exchange (mainly United States of America Dollars) to the market. Central banks have given a myriad of reasons for this particular behaviour. Chief among these and which is the focus of this paper is to smooth volatility or reverse a trend of the domestic currency in this case the kwacha. Despite central banks’ intervention activities in the foreign exchange markets, literature on the efficacy of these interventions in terms of impacting domestic currencies has remained controversial. While some strands of literature seem to suggest that such intervention has an impact on the currencies some literature disagrees. Early studies done in the 1980s suggest that intervention operations do not affect the exchange rate and if they do this effect is very small and only in the short run. More recent studies however, have found evidence of the effect on both the level and volatility of exchange rates. Further, recent studies focused on emerging market and developing countries have found strong evidence of the effect of central banks’ intervention operations in the foreign exchange market on exchange rates. This paper therefore examines the effect of the BOZ’s foreign currency market interventions on the level and volatility of the kwacha/ USD exchange rate between 1995 and 2008. In order to study the impact of interventions on the kwacha, the paper uses monthly data (both sales and purchases) on foreign exchange intervention and employs the GARCH (1, 1) and Exponential GARCH frameworks to model volatility. The results from GARCH model suggest that sales of foreign exchange in this case the $ causes the exchange rate to appreciate while purchases of the $ cause the exchange rate to depreciate. As for the impact on volatility, the GARCH (1, 1) model reveals that BOZ interventions increase volatility. Empirical results from the EGARCH model on the other hand suggest that both sales and purchases of $ cause the exchange rate to appreciate. The results on the impact of intervention on volatility are mixed though generally intervention appears to be increasing volatility.
    Keywords: foreign exchange intervention; Bank of Zambia; EGARCH
    JEL: F31 A10
    Date: 2009–05

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