nep-afr New Economics Papers
on Africa
Issue of 2010‒09‒11
twenty papers chosen by
Quentin Wodon
World Bank

  1. Are African Countries Paying Too Much Attention To Agriculture? By Christiaensen, Luc; Demery, Lionel
  2. Nigeria: Mapping the Shari`a Movement By Lubeck, Paul M
  3. The Triple Crisis: What Development Prospects for Africa? By de Janvry, Alain; Sadoulet, Elisabeth
  4. FDI and Export Participation of Local Firms in Africa: The Case of the Kenyan Garment Industry By Fukunishi, Takahiro
  5. Higher Education and Economic Development in Africa: a Review of Channels and Interactions. By Francis Teal
  6. Trade Regionalisation and Openness in Africa By Lelio Iapadre and Francesca Luchetti
  7. EU Policies and African Human Capital Development By Yaw Nyarko
  8. Household-Level Consumption in Urban Ethiopia: The Impact of Food Price Inflation and Idiosyncratic Shocks. By Yonas Alem; Måns Söderbom
  9. Simulation of the Effects of the Economic Crisis and Response Policies on Children in West and Central Africa: The Case of Burkina Faso By John Cockburn; Luca Tiberti; Ismaël Fofana; Lacina Balma; Samuel Kaboré; UNICEF Innocenti Research Centre. MONEE project; UNICEF Regional Office for West and Central Africa
  10. Institution [Un]Building: Decentralising Government and the Case of Rwanda By Jesse McConnell
  11. The Burkinabe Cotton Story 1999-2007: Sustainable Success of Sub-Saharan Mirage? By Kaminski, Jonathan; Headey, Derek; Bernard, Tanguy
  12. Decentralisation in Africa and Fiscal Competition Evidence from Benin By Emilie Caldeira; Martial Foucault; Grégoire Rota-Graziosi
  13. A Phoenix in Flames? Portfolio Choice and Violence in Civil War in rural Burundi By Eleonora Nillesen; Philip Verwimp
  14. Regional Integration, Fragility and Institution Building: An Analytical Framework Applied to the African Context By Thierry Verdier
  15. The Security-Politics-Development Nexus: The Lessons of State-Building in Sub-Saharan Africa By Necla Tschirgi
  16. Adverse Shocks and Social Protection in Africa: What Role for Formal and Informal Financial Institutions? By Abena D. Oduro
  17. Land Use, Production Growth, and the Institutional Environment of Smallholders: Evidence from Burkinabe Cotton Farmers By Kaminski, Jonathan; Thomas, Alban
  18. The home team scores! A first assessment of the economic impact of World Cup 2010 By Stan du Plessis; Cobus Venter
  19. Multi-level Governance and Security: The Security Sector Reform Process in the Central African Republic By Niagalé Bagayoko-Penone
  20. The Economic Legacy of Civil War: Firm Level Evidence from Sierra Leone By Collier,Paul; Duponche, Marguerite

  1. By: Christiaensen, Luc; Demery, Lionel
    Keywords: Africa, Agriculture, Poverty
    Date: 2010
  2. By: Lubeck, Paul M
    Keywords: Nigeria, Shari`a, Muslim, politics, africa
    Date: 2010–07–23
  3. By: de Janvry, Alain; Sadoulet, Elisabeth
    Keywords: Africa, Triple Crisis, Development, WIDER 25 Anniversary
    Date: 2010
  4. By: Fukunishi, Takahiro
    Abstract: FDI in the garment sector has been the single case of large-scale manufacturing investment in African low-income countries since the 1990s. While FDI has triggered the development of local industries in many developing countries, it has not yet been realized in Africa. This paper describes the spillover process in the Kenyan garment industry and investigates the background of local firms' behavior through firm interviews and simulation of expected profits in export market. It shows that credit constraint, rather than absorptive capacity, is a primary source of inactive participation in export opportunity. Only firms which afford additional production facilities without sacrificing stable domestic supply may be motivated to start exporting. However, in comparison with successful Asian exporters, those firms were not as motivated as Asian firms due to the large gap in expected profits.
    Keywords: Textile industry, Foreign investments, Exports, Manufacturing exports, FDI spillover, sub-Saharan Africa
    JEL: F21 L67 O14 O33
    Date: 2010–04
  5. By: Francis Teal
    Abstract: While the numbers with completed tertiary level education are low in Africa, both relative to other countries and in absolute terms, they have been growing very rapidly. Three questions are addressed in this paper. The first is how higher education links to other forms of capital accumulation in a process that leads to economic growth. The second is how higher education links to job outcomes in particular the role of the public sector and self-employment as outcomes for graduates. The third is whether and how an expansion of skilled jobs can create its own demand. The paper draws on both macro and micro evidence to answer those questions which are placed in a long run historical context. It is argued that growth has been more closely linked to investment in physical capital than in education and this may well reflect the fact that education is most valuable when it is linked to technology which requires higher skills. Data from thirty two African countries are used to show that the returns to education, measured both by macro production functions and by micro earning functions, are highest for those with higher levels of education. A contrast is drawn between the role of higher education in providing access to public sector employment and the increasing importance of self-employment in Africa. The paper concludes by asking whether Africa can use its investment in higher skilled labour to effect a service based growth revolution.
    Date: 2010
  6. By: Lelio Iapadre and Francesca Luchetti
    Abstract: The intensity of trade among countries belonging to the same region depends not only on the existence and effectiveness of a regional integration agreement, but also on other factors, which include the overall trade policy orientation and the relative level of geo-graphic and economic barriers affecting intra- and extra-regional trade. After presenting a set of indicators aimed at measuring correctly the intensity of bi-lateral trade preferences, this paper shows that most African countries tend to trade more intensely with partners belonging to the same region than with the rest of the world. However, this is not so much the result of the weak regional integration agreements that are in force in Africa, as a consequence of the manifold barriers limiting the degree of international openness of African countries. Under this perspective, a relatively high level of intra-regional trade, far from revealing the success of preferential integration policies, confirms that Africa’s participation in the process of globalisation is still very limited.
    Date: 2010–06–15
  7. By: Yaw Nyarko
    Abstract: Brain Circulation between the European Union (EU) and Sub-Saharan Africa is a crucial ingredient in Human Capital formation in the latter. A major constraint to African development is the very low base of skilled and highly educated workers and professionals. The production of skilled workers has been low, and only recently has seen a dramatic increase. Recent papers by many authors have indicated that a channel for human capital growth has been, paradoxically, the possibility of the brain drain which serves as both an incentive mechanism and which results in higher human capital when the drainers return. After a review of some of the literature, these insights are applied to the debates raging today on European Union migration policy: the Blue Card, Migration Con-tracts, anti-Brain Drain legislation, etc. This paper argues that a careful calibration of the EU policies may enable faster Human Capital growth in Africa, while, at the same time, being beneficial to the EU by supplying critically needed skills into the EU economy. By carefully planning the production of human capital and the consequent flow of skilled migrants into Europe, the EU can assist in the development of vitally needed numbers of trained or skilled workers in Africa.
    Date: 2010–04–15
  8. By: Yonas Alem; Måns Söderbom
    Abstract: We use survey data to investigate how urban households in Ethiopia coped with the food price shock in 2008 and idiosyncratic shocks. Qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008, and that a significant proportion of households had to adjust food consumption in response. Regression results indicate that households with low asset levels, and casual workers, were particularly adversely affected by high food prices. In contrast, we find that household demographics and education matter little for the impact of the shock. Our analysis of idiosyncratic shocks indicates that losing one’s job is a serious, uninsurable shock. We interpret the results as pointing to the importance of growth in the formal sector so as to generate more well-paid and stable jobs. Our results also imply that aid programs responding to food price shocks can be made more efficient by targeting low-asset households with members on the fringe of the labor market.
    Keywords: consumption; food price inflation; shocks; Africa; urban Ethiopia
    JEL: O12 O18 D12
    Date: 2010
  9. By: John Cockburn; Luca Tiberti; Ismaël Fofana; Lacina Balma; Samuel Kaboré; UNICEF Innocenti Research Centre. MONEE project; UNICEF Regional Office for West and Central Africa
    Abstract: Burkina Faso’s hard earned economic gains in recent years have been eroded by the 2008-09 world financial and economic crisis. The country will particularly feel the effects of the world economic crisis due to its close links with the world economy. Most of the adverse effects are transmitted to households then passed onto children. The situation of children principally depends on the monetary and non-monetary wellbeing of their household. This, together with their greater vulnerability, means that children are at risk of suffering more, and for longer, from the impacts of the crisis. It is therefore crucial to understand and anticipate the effects that the crisis may have on children in Burkina Faso and to propose options for social protection to counter these effects. To this end, we propose a macro-micro economic approach. Macro-micro economic analysis uses a general calculable equilibrium (CGE) model to simulate the impacts of various transmission channels of the crisis to the Burkinabe economy. The results of these simulations are then used for the micro-econometric analysis, which integrates individual and household economic behaviour to evaluate the impact of the crisis on child welfare. According to our simulations, which run from 2009 to 2011, the financial crisis respectively leads to 5 and 1 percentage point increases in the incidence of monetary and caloric poverty among Burkinabe children. Moreover, the school enrolment rate for children will decline by about 0.7 percentage points due to the crisis, while the child labour rate will increase by about 1 percentage point. Finally, a 1 percentage point decrease in the medical consultation rate among children is expected, along with substitution from modern health services to traditional medicine. Large regional and rural vs. urban gaps are also noted. A monetary transfer policy targeting poor children appears to be the most effective at reversing the negative effects of the crisis and returning to the trend that would have existed without the crisis. Such a policy, financed by external aid and with a budget of 1% of GDP, re-establishes the trend that monetary poverty would have followed in the absence of a crisis and even leads to a reduction in hunger. It also limits the crisis’ adverse effects on school enrolment, child labour and sick children’s access to modern health care services. A universal (non-targeted) variant of this transfer policy for 0-5 year-olds has similar results and is easier to enact. Policies which subsidize food and cereals, as well as monetary transfer policies for the Centre and Mouhoun regions (the areas most affected by the August-September 2009 floods) were also analyzed.
    Keywords: central africa; child labour; child poverty; education; health; hunger; social protection; west africa; world economics;
    JEL: A1 C10 D1 E17 F01 O1
    Date: 2010
  10. By: Jesse McConnell
    Abstract: The challenge of institution building in African countries remains a major threat to the establishment of peace and justice, and the entrenchment of sustainable social and economic development. This may be attributed largely to the dynamic and complex social landscape of most African countries. While single borders bring political definition to post-independent countries, such countries often struggle to find a single national identity that transcends numerous tribal, ethnic or historic identities. The role of central government in creating an effective structure of governance is crucial in the steps towards postconflict nation-building. However, national institution building is not necessarily the right answer, especially in contexts difficult to govern, such as vast geographic areas or complex social and ethnic realities. It is in this sense that this paper – and the initial states of this research – seeks to find an alternative to ‘institution building’ as a way forward in good governance practices, suggesting rather a decentralised and localised approach. The case study that will be brought to be bear as an example of this is Rwanda and a recent governance mechanism – Imihigo – as an approach that has helped create a new national identity while instilling a culture of service delivery and accountability amongst its public servants and political leadership. What this paper will seek to argue – in looking at the approach by Rwanda in decentralising its government – is that institution building is not necessarily the way forward in Africa’s ‘good governance’ discourse. Instead, this paper – and the broader borders of what my research is seeking to explore and understand – seeks to present a reformed approach to good governance in Africa, especially contexts that have been divided along complex lines such as ethnicity, geography, national identity, or the competition for natural resources. Though it will be beyond the scope of this research paper specifically, intended environments that this research is hoped to be applicable – and will therefore involve further research around the applicability of such – include the Democratic Republic of Congo, Cote d’Ivoire, Burundi and Sudan.
    Keywords: governance; decentralisation
    Date: 2010–05–15
  11. By: Kaminski, Jonathan; Headey, Derek; Bernard, Tanguy
    Abstract: Like many other African countries in the 1980s, Burkina Faso was urged to engage in a far-reaching liberalization of its state-led cotton sector. Yet unlike most of its neighbors, the Burkinabè government rejected both the status quo and wholesale liberalization, and instead embarked on a more gradual and sequenced reform path characterized by institutional innovations and partial privatization. Whether the reforms contained genuinely successful elements is therefore an important question, but also a difficult one given the absence of a counterfactual, the confounding influence of exogenous shocks and the recent financial troubles of the sector. To unravel this puzzle, this paper reviews existing evidence linking the reforms to various outcomes, but also develops a novel counterfactual analysis to more rigorously assess the impacts of these reforms. Our analysis shows that while many elements of the reform process did achieve important economic objectives, return migration from Cote dâIvoire explains a third of production growth, financial elements of the reforms were not fully sustainable, and institutional arrangements failed to fully empower cotton farmers. This provides both positive and negative lessons for other would-be cotton reformers.
    Keywords: Burkina Faso, Cotton, Poverty Reduction, Counterfactual analysis, Production Growth, Political Sustainability, Crop Production/Industries, Farm Management,
    Date: 2010
  12. By: Emilie Caldeira; Martial Foucault; Grégoire Rota-Graziosi
    Abstract: Without denying particular dimensions of the decentralisation in Sub-Saharan countries, this paper applies standard reasoning from the fiscal federalism literature to a developing country and tests the existence of strategic interactions among local Beninese governments, called ‘communes’. We first propose a two-jurisdiction model of public expenditure interactions, considering a constrained Nash equilibrium to capture the extreme poverty of some communes. We show that spillovers among jurisdictions involve strategic behaviours of local officials who have sufficient levels of fiscal resources. Second, by estimating a spatial lag model, our analysis provides evidence for the presence of strategic interactions in Benin, contingent on communes’ fiscal autonomy. Such interactions arise among communes which are geographically or ethnically close. We also highlight both an opportunistic behaviour of local governments before local elections and an effect of partisan affiliations. This African democracy appears to be as concerned as developed democracies with strategic fiscal interactions. <P>Cet article applique la théorie du fédéralisme budgétaire à l'analyse du processus de décentralisation d'un pays en développement (le Bénin) et teste l'existence d'interactions stratégiques parmi les juridictions locales du Bénin. À partir d'un modèle de concurrence budgétaire à 2 juridictions, nous définissons les conditions d'un équilibre de Nash contraint pour capturer les effets d'extrême pauvreté de certaines communes. Nous montrons que des externalités entre communes impliquent des comportements stratégiques des décideurs publics locaux pour ceux disposant de ressources budgétaires suffisantes. Ensuite, en estimant un modèle d'interactions spatiales, nous montrons la présence d'interactions stratégiques pour les communes du Bénin, contingentes à leur autonomie budgétaire. De telles interactions émergent parmi les communes géographiquement et ethniquement proches. Par ailleurs, ces interactions surviennent dans le cadre d'un cycle électoral opportuniste de dépenses publiques et sont sensibles à l'affiliation partisane des maires. En conclusion, le Bénin apparaît aussi touché que les démocraties développées par des comportements stratégiques en dépenses publiques locales.
    Keywords: Fiscal interactions, Benin, decentralisation, local government, dynamic panel data, interactions budgétaires, Bénin, décentralisation, gouvernements locaux, économétrie spatiale
    Date: 2010–08–01
  13. By: Eleonora Nillesen (Wageningen University); Philip Verwimp (Fund for Scientific Research – Flanders, University of Antwerp)
    Abstract: This paper challenges the idea that farmers revert to subsistence farming when confronted with violence from civil war. While there is an emerging macroeconomic consensus that wars are detrimental to development, we find contrasting microeconomic evidence. Using several rounds of (panel) data at the farm and community level, we find that farmers in Burundi who are confronted with civil war violence in their home communities increase export and cash crop growing activities, invest more in public goods and reveal higher levels subjective welfare evaluations. We interpret this in the light of similar recent micro-level evidence that points to post-traumatic growth effects after (civil) warfare. Our results are confirmed across specifications as well as in robustness analyses.
    Keywords: Civil war, investment, post-traumatic growth
    Date: 2010–05
  14. By: Thierry Verdier
    Abstract: The purpose of this paper is to discuss how regional integration processes may contribute to statebuilding and promote exit from fragility for countries characterised by weak state institutions. After presenting a simple conceptual framework to discuss the effects of external and regional integration on fragile states, we analyse the policy trade-offs that may arise in such contexts. The paper then reviews the specific regional experiences of Sub-Saharan countries and their inter-actions with fragility issues. Finally, we discuss policy implications for the EU in the context of its regional trade and development policies with African fragile countries. The central conclusions of the analysis are the following: I) a two-tier approach to regional integration, which combines both top-down and bottom-up processes, is necessary; 2) the EU approach to regional integration in Africa should promote Building-Blocks and not Stumbling-Blocks; and 3) specific considerations should be given to make the trade integration strategy fragility responsive.
    Keywords: state building
    Date: 2010–06–15
  15. By: Necla Tschirgi
    Abstract: How can development policy support weak, dysfunctional or fragile states? What constitutes state fragility and what are the appropriate instruments for state-building? After reviewing two recent quantitative indexes (The Index of State Weakness in the Developing World and The Ibrahim Index of African Governance), this paper cautions against the current tendency to categorise a large number of countries as weak, fragile or failing states. Drawing upon country case studies on Namibia, Somalia and Guinea-Bissau, the paper argues that state-building is fundamentally a political process and external state-builders need to develop greater understanding of the internal dynamics of individual societies in order to provide appropriate support to address state fragility. Current strategies for statebuilding are heavily weighted in favour of technical, institutional and formal arrangements. Moreover, since 9/11, the international state-building agenda has increasingly focused on state weakness as a challenge for international peace and security, rather than as an issue of national governance. As a result, many preferred policy prescriptions risk weakening the very states that they hope to strengthen.
    Keywords: governance
    Date: 2010–04–15
  16. By: Abena D. Oduro
    Abstract: This paper presents evidence on the wide range of adverse shocks reported by African households. The current financial and economic crisis adds another layer of risk to al-ready vulnerable households and firms. In responding to an adverse shock, households are involved in a balancing act that is aimed at maintaining consumption and/or assets above critical levels. Households mainly use coping mechanisms that depend on family and other networks and self-insurance. There is limited recourse to public social protection and formal credit and insurance markets. The paper examines some informal financial arrangements. Some of these are not designed to smooth consumption when there is an adverse shock. These informal mechanisms have the potential to be the platform to expand access and utilisation of formal finance particularly in rural communities. There is a clear role for publicly provided interventions. This is because informal risk sharing mechanisms do not cover all shocks. The premium paid may not be adequate to cover the entire financial implications of the shock. Finally, the design of the risk-sharing institutions can result in the very poor being excluded.
    Date: 2010–04–15
  17. By: Kaminski, Jonathan; Thomas, Alban
    Abstract: The cotton boom in Burkina Faso consisted of a growth in cotton land shares together with an overall increase in total cultivated land. This paper examines the impact of institutional changes in the cotton sector on the evolution of smallholdersâ land-use decisions. The empirical analysis is supported by a structural model that takes into account the specific institutional features of the Burkinabè cotton sector and builds upon householdlevel data collected in rural Burkina Faso. We attribute most of the change in land use to the newly established institutional arrangements between producers and stakeholders, mechanization, and slackening of the food security constraint.
    Keywords: Burkina Faso, Cotton, Land Use, Commodity Reform, Institutional Arrangements, Farm Management, Financial Economics, N57, 013, O33, Q15, Q18,
    Date: 2010
  18. By: Stan du Plessis (Department of Economics, University of Stellenbosch); Cobus Venter (Bureau for Economic Research, University of Stellenbosch)
    Abstract: The FIFA World Cup hosted in South Africa during June/July 2010 was a much anticipated sport spectacle, but also widely expected to yield lasting and considerable economic benefits for the host country. Optimistic scenarios have encouraged these expectations, but there have also been cautionary studies based on the economic impact of earlier mega sport events. There are three dimensions to the potential contribution of a mega sport event to local economy, (i) the preparatory activity such as the construction of stadia, (ii) the event itself and the impact of large numbers of tourists and (iii) the long term impact of the tournament due to a changed perception of the host economy and the potential for trade, investment and tourism. This paper provides an early assessment of the tournament’s known impact along these dimensions and the results are sobering: the tournament made only a small contribution to the economy in the preparatory phase, though that was fortuitously countercyclical. Further the immediate impact of the event on the economy, around 0.1% of GDP, was much lower than widely expected and reported. It is the longer run implications of hosting a successful tournament that holds more promise for sizeable benefits, though the outcome remains uncertain on that dimension and contingent on other factors that might undermine the favourable impression created by the tournament.
    Keywords: FIFA world cup, Mega sport events, Sport and economics
    JEL: L83
    Date: 2010
  19. By: Niagalé Bagayoko-Penone
    Abstract: Analysing how the SSR process in CAR has been defined and then implemented, this article puts emphasis on the international interactions between institutional actors who may be geographically/territorially situated at different levels of the policy-making process in different places around the world, thus suggesting ways to grasp multi-actor and multi-sited governance. Therefore, it advocates an approach which consists of expanding the agenda of the traditional multi-level governance approach. The issue at stake here is to capture the interactive institutional dynamic at an international level, thus developing a methodological framework that is likely to seize both the topdown and the bottom-up dynamics of decision-making processes. The first objective is to capture the sets of actors and procedures which drive the process, and to map out the various levels of government at which decisions are made, either the more top-down, or the more bottom-up oriented ones, answering two sets of questions: How is security governance organised? Who decides, and on which matters? Secondly – and more fundamentally – is to capture the intermingling of domestic and international decision-making processes which increasingly overlap and interfere with each other in Southern countries.
    Keywords: multilevel governance
    Date: 2010–05–15
  20. By: Collier,Paul; Duponche, Marguerite
    Abstract: This paper positions itself among the very rare microeconomic analyses on the consequences of civil war. Up to now, most analyses on this topic are based upon household surveys. The originality of the present study is that it investigates for the first time the likely predominant route by which civil conflict affects the economy, namely through firms. The context of the study is Sierra Leone, a country that was ravaged by a violent conflict from 1991 to 2002. The approach is to use geographical variations in the intensity of conflict to estimate the impact of violence on firms, on which we have data from the World Bank 2007 Employers Survey. The proposed theory is that during the conflict, violence affects production through a form of technical regress and demand through a reduction in income. The persistent post-conflict effects are yet less obvious We assume that war forces a prolonged contraction in output skills, which slows the pace of recovery. We termed this phenomenon ‘forgetting by not doing’. The results confirm our theory. Civil war negatively impacts the existence of firms and employment, but there is no distinction between regions. However, the size of firms in 2006 is negatively affected by the intensity of the war in the area it operates. Yet, firms tend to grow twice faster in more affected areas, strikingly matching the macroeconomic rate of recovery post-conflict environments (Collier and Hoeffler, 2004). The analysis of training patterns clearly confirms the long lasting lack of skills experienced as a result of the war in areas where the conflict was more intense.
    Keywords: entrepreneurship, national systems of innovation, SMEs, innovative capabilities, emerging economies
    Date: 2010

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