nep-afr New Economics Papers
on Africa
Issue of 2010‒06‒18
thirteen papers chosen by
Quentin Wodon
World Bank

  1. Institutions in African history and development: A review essay By Fenske, James
  2. Does land abundance explain African institutions? By Fenske, James
  4. Drivers of change or cut-throat competitors? Challenging Cultures of Innovation of Chinese and Nigerian migrant entrepreneurs in West Africa By Kohnert, Dirk
  5. The Impact of the Global Economic Crisis on Sub-National Government – Lessons from the Free State Province in South Africa By Helene Maisonnave; Jugal Mahabir; Ramos Mabugu; Margaret Chitiga
  6. Choice of exchange rate regimes for African countries: Fixed or Flexible Exchange rate regimes? By Simwaka, Kisu
  7. Estimation of the Water Quality Amelioration Value of Wetlands: A Study of the Western Cape, South Africa By Turpie, Jane; Day, Elizabeth; Ross-Gillespie, Vere; Louw, Anton
  8. Adoption and Impact of Improved Groundnut Varieties on Rural Poverty: Evidence from Rural Uganda By Kassie, Menale; Shiferaw, Bekele; Muricho, Geoffrey
  9. Ethiopia: Diversifying the Rural Economy. An Assessment of the Investment Climate for Small and Informal Enterprises By Loening, Josef; Mikael Imru, Laketch
  10. The African Credit Trap By Svetlana Andrianova; Badi Baltagi; Panicos Demetriades; David Fielding
  11. L’influence des mécanismes de gouvernance sur la performance des institutions de microfinance d’Afrique Sub-saharienne By Hubert Tchakoute Tchuigoua
  12. Using a Discrete Choice Experiment to Elicit the Demand for a Nutritious Food: Willingness-to-Pay for Orange Maize in Rural Zambia By J. V. Meenakshi; Abhijit Banerji; Victor Manyong; Keith Tomlins; Priscilla Hamukwala; Nitya Mittal
  13. Behavioral Response to Plastic Bag Legislation in Botswana By Dikgang, Johane; Visser, Martine

  1. By: Fenske, James
    Abstract: In this review, I discuss the role of African institutions in general and pre-colonial institutions in particular in explaining present-day African poverty. Six of the most often cited explanations of African poverty -- geography, ethnolinguistic fractionalization, the slave trades, colonial rule, underdevelopment, and failed aid -- operate largely through institutions. Bad institutions themselves directly affect modern growth. Pre-colonial institutions also matter for present-day outcomes. I look at four broad institutional types (land tenure, slavery, polygyny and states), outline influential theories that explain why they took the shapes they did before colonial rule, and why they matter to Africa today.
    Keywords: Africa; institutions; history; development
    JEL: N57 O10
    Date: 2010–04
  2. By: Fenske, James
    Abstract: I show how abundant land and scarce labor shaped African institutions before colonial rule. I present a model in which exogenous land quality and endogenously evolving population determine the existence of land rights, slavery, and polygyny. I use cross-sectional data on pre-colonial African societies to demonstrate that, as in the model, the existence of land rights, slavery, and polygyny occurred where land was most suitable for agriculture, and where population density was greatest. These results are robust to alternative measures of institutions and historical population, and better fit the data than alternative theories of slavery.
    Keywords: Land tenure; slavery; polygyny; states; Africa
    JEL: N57 O10
    Date: 2010–06
  3. By: Jacques Kibambe (Department of Economics, University of Pretoria); Arnold Zellner (Booth School of Business, University of Chicago)
    Abstract: Using a disaggregated Marshallian Macroeconomic Model (MMM-DA), this paper investigates how the adoption of a set of 'free market reforms' may affect the economic growth rate of South Africa. Accounting for possible side effects mainly on the budget deficit, our findings suggest that the institution of the proposed policy reforms would yield a substantial growth in the aggregate annual real GDP. The resulting GDP growth rate could range from 5.3 percent to 9.8 percent depending on which variant of the reform policies is implemented.
    Keywords: Marshallian Macroeconometric Model, Disaggregation, Transfer functions
    JEL: E27
    Date: 2010–06
  4. By: Kohnert, Dirk
    Abstract: The remarkable influx of Chinese migrant entrepreneurs in different West African countries in recent years has been met with growing resistance by established local entrepreneurs. Whether the former have a competitive edge over the latter because of distinctive socio-cultural traits, or whether the Chinese supposed effectiveness is just a characteristic feature of any trading Diaspora, is open to question. This exploratory study of Chinese and Nigerian entrepreneurial migrants in Ghana and Benin tries to answer this question. Apparently, the cultural motive powers of migrant drivers of change are not restricted to inherited value systems or religions like a protestant ethic or Confucianism, but they are permanently adapted and invented anew by transnational networks of migration in a globalized world. There is no evidence for a supposed superiority of Chinese versus African innovative cultures of entrepreneurial migrants. Rather there exists an enhanced innovative capacity of a trading Diaspora in general vis-à-vis local entrepreneurs, regardless of the background national culture in which it is embedded. In addition, the rivalry of Chinese and Nigerian migrant entrepreneurs in African markets does not necessarily lead to the often suspected cut-throat competition under the impact of globalization. Often both groups act rather complementary. This contributes under certain conditions even to poverty alleviation in the host country.
    Keywords: trading diasporas; international migration; entrepreneurs; culture; innovation; SME; Africa; China; Nigeria; Cotonou; Accra;
    JEL: F22 N85 N87 O15 J61 Z13 M13 R23
    Date: 2010–06–08
  5. By: Helene Maisonnave (Financial and Fiscal Commission); Jugal Mahabir (Financial and Fiscal Commission); Ramos Mabugu (Financial and Fiscal Commission); Margaret Chitiga (Department of Economics, University of Pretoria)
    Abstract: A provincial computable general equilibrium model for the Free State province in South Africa is used to quantify the channels by which the recent global economic crisis affects the province. The analysis allows focus on three levels through which provincial economies and their people are impacted by a global economic crisis, namely the macro-economic level, the meso-economic level and the micro-economic/household level. The novel features of the paper are mainly applying this methodology at sub national government level. The decrease in world prices combined with the drop in world demand lead to a fall in production for most sectors in the province. There is a negative impact on institutions, and households see their incomes drop. Though the crisis seems to be petering out now, there are lessons for intergovernmental financial relations that this paper has highlighted and long run effects of the crisis that the province needs to confront.
    Keywords: Global crisis, Computable General Equilibrium
    JEL: D58 O55
    Date: 2010–06
  6. By: Simwaka, Kisu
    Abstract: The choice of an appropriate exchange rate regime has been a subject of ongoing debate in international economics. The majority of African countries are small open economies and thus where the choice of the exchange rate regime is an important policy issue. Aside from factors such as interest rates and inflation, the exchange rate is one of the most important determinants of a country’s relative level of economic health. For this reason, exchange rates are among the most watched analyzed and governmentally manipulated economic variables. This paper revisits the debate on the choice of an appropriate exchange-rate regime for African countries. It starts by reviewing literature on the debate of appropriate exchange rate regimes. It then discusses relevant considerations for the choice of the exchange rate regimes for African countries. The debate revolves around the effect of exchange rate on macroeconomic management, particularly inflation and export competitiveness. The paper recommends the conventional peg arrangement as a viable option for the majority of low-income African countries. But this is contingent on a number of important pre-conditions. For middle-income African economies, with relatively developed financial markets and linkages to modern global capital markets, floating arrangements, including the managed floating exchange rate regime, look more promising. In conclusion, the paper cautions that no single exchange rate regime is right for all countries or at all times.
    Keywords: Exchange rate options; sub-Saharan African countries
    JEL: F30 F31 F33
    Date: 2010–03–15
  7. By: Turpie, Jane; Day, Elizabeth; Ross-Gillespie, Vere; Louw, Anton
    Abstract: Wetlands are commonly understood to have the capacity to reduce the loads of excess nutrients, pathogens, sediments, and other contaminants generated by various activities in their catchment areas. However, quantifying these “services” is difficult and most research in this field has concentrated on artificial treatment wetlands. Understanding the value of their water treatment characteristics, as well as the other services they provide, is increasingly recognized as essential to achieving a balance between conservation and activities that degrade or replace wetlands. The aim of this study is to estimate the water treatment capacity of wetlands on a landscape scale in the South Western Cape of South Africa and estimate the economic value of the service performed. We collected samples at the outflow points of 100 subcatchment areas and measured the loads of nitrogen, dissolved phosphorus, and suspended solids, which were analyzed with respect to detailed spatial data on land cover and wetlands area. Wetlands play a significant role in the reduction of nitrates, nitrites, and ammonium, but not dissolved phosphorus or suspended solids. Estimated removal rates range from 307 to 9,505 kg N per ha-1 year-1, with an average of 1,594 ± 1,375 kg N per ha-1 year-1. Data from a number of water treatment works suggest that the cost of removal of ammonium nitrogen is in the order of ZAR 26 per kilogram. Applied to the wetlands in the study area—assuming wetlands do play a role in total phosphorus removal—this suggests that the average value of the water treatment service provided by wetlands in the study area is about ZAR 14,350 ± 12,385 ha-1 year-1. These values are high enough to compete with the alternative land uses that threaten their existence. The results suggest that wetlands should be given considerably more attention in land-use planning and regulation.
    Keywords: ecosystem services, wetlands, economic valuation, water treatment
    JEL: Q57
    Date: 2010–06–08
  8. By: Kassie, Menale; Shiferaw, Bekele; Muricho, Geoffrey
    Abstract: This paper evaluates the ex-post impact of adopting improved groundnut varieties on crop income and rural poverty in rural Uganda. The study utilizes cross-sectional farm household data collected in 2006 in seven districts of Uganda. We estimated the average adoption premium using propensity score matching (PSM), poverty dominance analysis tests, and a linear regression model to check robustness of results. Poverty dominance analysis tests and linear regression estimates are based on matched observations of adopters and non-adopters obtained from the PSM. This helped us estimate the true welfare effect of technology adoption by controlling for the role of selection problem on production and adoption decisions. Furthermore, we checked covariate balancing with a standardized bias measure and sensitivity of the estimated adoption effect to unobserved selection bias, using the Rosenbaum bounds procedure. The paper computes income-based poverty measures and investigates their sensitivity to the use of different poverty lines. We found that adoption of improved groundnut technologies has a significant positive impact on crop income and poverty reduction. These results are not sensitive to unobserved selection bias; therefore, we can be confident that the estimated adoption effect indicates a pure effect of improved groundnut technology adoption.
    Keywords: groundnut technology adoption, crop income, poverty alleviation, propensity score matching, switching regression, stochastic dominance, Rosenbaum bounds, Uganda
    JEL: C01 C21 I32 O12 Q16
    Date: 2010–05–25
  9. By: Loening, Josef; Mikael Imru, Laketch
    Abstract: The Rural Investment Climate Assessment (ICA) is one of the first studies of small and informal firms in rural and semi-urban areas in Ethiopia. Little was known about the nature and size distribution of small, rural firms, the constraints they face when trying to expand or even to survive, the significance of their impact on the broader rural economy, and the policies, reforms and public investments that could spur investment by rural non-farm enterprises. One quarter of all households in rural Ethiopia own and operate a small enterprise. For these households, the income they earn from the business contributes about 40 percent of their total household income, indicating that the nonfarm sector in rural areas is significantly larger than was previously thought. The Rural ICA finds that participation on small and informal enterprise in rural areas contributes to achieving growth and food security as well as in reducing poverty and inequality. Among the recommendations of the Rural ICA is a call for the development of rural market towns. Small, fragmented markets are the major constraint to business performance and growth. In small market towns demand is higher, transaction costs are lower, competition is stronger, and there are more incentives to invest. Although, overall, nonfarm enterprise productivity and profits are low, enterprises in rural towns are as productive as informal small enterprises in urban areas - and about 50 percent more productive than enterprises in remote rural areas. As the Ethiopian economy develops, with higher productivity and better performance in agriculture, the nonfarm sector will also grow and become increasingly important as an alternative employer of labor and source of livelihood in rural areas. This suggests the policy priority should not be 'either agriculture or the nonfarm sector' but a balanced approach.
    Keywords: Ethiopia, enterprise performance, informal sector, rural-urban linkages
    JEL: L25 O55 O18
    Date: 2009–10–06
  10. By: Svetlana Andrianova; Badi Baltagi; Panicos Demetriades; David Fielding
    Abstract: We put forward a plausible explanation of African financial underdevelopment in the form of a bad credit market equilibrium. Utilising an appropriately modified IO model of banking, we show that the root of the problem could be unchecked moral hazard (strategic loan defaults) or adverse selection (a lack of good projects). We provide empirical evidence from a large panel of African banks which suggests that loan defaults are a major factor inhibiting bank lending when the quality of regulation is poor. We also find that once a threshold level of regulatory quality has been reached, improvements in the default rate or regulatory quality do not matter, providing support for our theoretical predictions.
    Keywords: Dynamic panel data; African financial under-development; African credit markets
    JEL: G21 O16
    Date: 2010–05
  11. By: Hubert Tchakoute Tchuigoua
    Abstract: L’objectif de l’article est de vérifier empiriquement les effets des mécanismes internes et externes de gouvernance sur la performance des IMF de l’Afrique sub-saharienne. L’économétrie des données de panel nous permet d’étudier un échantillon composé de 64 IMF africaines entre 2001 et 2005. Nous ne trouvons pas de relation significative entre les mécanismes internes de gouvernance et la performance des IMF. En revanche, à l’exception de la discipline de marché qui n’influence aucune des dimensions de la performance financière, nous trouvons une influence significative de la supervision et du ratio de capitalisation sur la rentabilité et la viabilité des IMF. Ce qui semble indiquer que les mécanismes internes et externes de gouvernance sont substituables. De plus, nous ne trouvons aucun effet significatif des mécanismes internes de gouvernance sur l’efficacité sociale des IMF.
    Keywords: Gouvernance; microfinance; qualité de portefeuille; performance
    Date: 2010–04
  12. By: J. V. Meenakshi (Department of Economics, Delhi School of Economics, Delhi, India); Abhijit Banerji (Department of Economics, Delhi School of Economics, Delhi, India); Victor Manyong (International Institute of Tropical Agriculture); Keith Tomlins (Natural Resources Institute, University of Greenwich); Priscilla Hamukwala (University of Zambia); Nitya Mittal (Department of Economics, Delhi School of Economics, Delhi, India)
    Abstract: Using a discrete choice experiment, this paper estimates the willingness to pay for biofortified orange maize in rural Zambia. The study design has five treatment arms, which enable an analysis of the impact of nutrition information, comparing the use of simulated radio versus community leaders in transmitting the nutrition message, on willingness to pay, and to account for possible novelty effects in the magnitude of premiums or discounts. The estimation strategy also takes into account lexicographic preferences of a subset of our respondents. The results suggest that (a) orange maize is well liked and can compete with white maize in the absence of a nutrition campaign, (b) there is a premium for orange maize with nutrition information, and (c) the mode of nutritional-message dissemination does not have a large impact on consumer acceptance, and (d) novelty effects do not translate into higher willingness to pay for orange maize.
    Date: 2010–06
  13. By: Dikgang, Johane; Visser, Martine
    Abstract: This paper investigates the use of charges and standards in dealing with a common externality, plastic litter from shopping bags in Botswana. The country passed a plastic bag tax (effective 2007) to curb the plastic bag demand. Interestingly, the legislation did not force retailers to charge for plastic bags, which they did voluntarily at different prices. We assessed the environmental effectiveness and efficiency of the plastic bag legislation by analyzing consumers’ sensitivity to the improvement of the plastic bag and related price charges. The introduction of the plastic bag levy led to a significant decline in the consumption of plastic bags per 1,000 Botswana pulas of shopping. The partial success of the Botswana levy was due to the constantly high prices of the bags.
    Keywords: demand, environment, litter, plastic bags, price
    JEL: Q53 Q58
    Date: 2010–05–25

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