nep-afr New Economics Papers
on Africa
Issue of 2010‒10‒16
fifteen papers chosen by
Quentin Wodon
World Bank

  1. On Tax Efforts and Colonial Heritage in Africa By Mkandawire, Thandika
  2. Political participation in Africa: Participatory inequalities and the role of resources By Isaksson, Ann-Sofie
  3. Economic Prediction of Sport Performances: From Beijing Olympics to 2010 FIFA World Cup in South Africa By Madeleine Andreff; Wladimir Andreff
  4. Cyclicality of Revenue and Structural Balances in South Africa By Burcu Aydin
  5. Performance of Fiscal Accounts in South Africa in a Cross-Country Setting By Burcu Aydin
  6. State capacity, manufacturing and civil conflict By Costa, Jacopo; Ricciuti, Roberto
  7. Measuring Financial Barriers Among East African Community Countries By Yi David Wang
  8. Banking sector stability, efficiency, and outreach in Kenya By Beck, Thorsten; Cull, Robert; Fuchs, Michael; Getenga, Jared; Gatere, Peter; Randa, John; Trandafir, Mircea
  9. An assessment of the effects of the 2002 food crisis on children's health in Malawi By Hartwig, R.; Grimm, M.
  10. Economic crisis and women’s employment rate in a Sub-Saharan African country: explaining the rise in women’s employment rate in the urban areas of Kenya By Wamuthenya, W.R.
  11. A Macro Model of the Credit Channel in a Currency Union Member: The Case of Benin By Issouf Samaké
  12. Child labor, agricultural shocks and labor sharing in rural Ethiopia By Debebe, Z.Y.
  13. Determinants of urban job attainment in Kenya across time: education and quality of jobs by gender By Wamuthenya, W.R.
  14. To what extent can disparities in compositional and structural factors account for the gender gap in unemployment in the urban areas of Kenya? By Wamuthenya, W.R.
  15. Orphanhood and Critical Periods in Children’s Human Capital Formation: Long-Run Evidence from North-Western Tanzania By Jens Hagen; Toman Omar Mahmoud; Natalia Trofimenko

  1. By: Mkandawire, Thandika (London School of Economics and Political Science. Department of International Development)
    Abstract: <p> One commonly observed phenomena about taxation in Africa are regional differences and the fact that southern African countries have higher levels of shares of taxation in GDP. This article argues that the major source of differences in ‘tax effort’ is the colonial histories of various countries. Using standard measures of ‘tax effort in a panel data framework and dividing colonial Africa along forms of incorporation into the colonial system, it shows that African countries and others with similar colonial histories have higher levels of ‘tax effort’. However, the difference disappears when we control for the colonial factor. These results hold under different model specifications. <p>
    Keywords: taxation; GDP; regional differences; colonial histories; tax effort;
    JEL: O20 O40 O55
    Date: 2010–10–05
  2. By: Isaksson, Ann-Sofie (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The aim of this paper is to examine the role of individual resource endowments for explaining individual and group variation in African political participation. Drawing on new data for more than 27 000 respondents in 20 emerging African democracies, the empirical findings suggest surprisingly weak explanatory power of the resource perspective, both for explaining individual variation and observed group inequalities in participation. In several cases, the relatively resource poor groups participate to a greater extent than the relatively resource rich.<p>
    Keywords: Political participation; Group inequalities; Resources; Africa; Afrobarometer
    JEL: D01 D72 O12 O55
    Date: 2010–08–03
  3. By: Madeleine Andreff (University of Paris-Est Marne la Vallée); Wladimir Andreff (University of Paris 1 Panthéon Sorbonne)
    Abstract: This paper uses forecasting techniques to predict outcomes in the Beijing Olympics and 2010 World Cup using economic variables.
    Keywords: sport, Olympics, World Cup
    JEL: L83
    Date: 2010–10
  4. By: Burcu Aydin
    Abstract: This paper applies a disaggregated method for the calculation of the cyclical component of the budget balance for South Africa with an emphasis on the effect of commodity and asset prices, and credit cycle. Results show that the cyclicality of tax revenue is mostly explained by the variations in tax bases. Change in the credit to private sector also has some affect on the revenue performance; however, asset and commodity prices are not significant in explaining the deviation of revenue from its trend. Nonetheless, quantitative effects of these prices are subject to assumptions used for long-run price levels.
    Keywords: Asset prices , Bank credit , Budgets , Business cycles , Commodity prices , Credit expansion , Economic models , Exports , Mining sector , Private sector , South Africa , Tax bases , Tax collection , Tax revenues ,
    Date: 2010–09–17
  5. By: Burcu Aydin
    Abstract: This paper analyzes the cyclical fluctuations in South Africa in a cross-country context, and studies the impact of the output gap by controlling for export intensity, the debt burden, asset prices, and banking crises. Results show that South Africa’s revenue performance was outstanding during the mid-2000s, and the recent decline in revenue was one of the least among the emerging and advanced markets. Results on the elasticity of tax revenue show that South Africa’s elasticity is higher during business upturns, indicating good prospects for recovering the revenue lost during the global financial crisis.
    Keywords: Business cycles , Cross country analysis , Economic models , Fiscal analysis , Revenues , South Africa , Tax collection , Tax revenues ,
    Date: 2010–09–17
  6. By: Costa, Jacopo; Ricciuti, Roberto
    Abstract: In this note we empirically analyze the link between state capacity and civil conflict via the manufacturing sector, which is the source of wealth for an emerging new elite interested in obtaining political representation, and is the outcome of a new political equilibrium more in tune with capital accumulation. This raises the cost of civil conflict, reducing its probability of occurrence. We find evidence in favor of our hypothesis in a panel of African countries.
    Keywords: civil conflict, manufacturing, state capacity, fragile states, Africa
    JEL: D74 O14
    Date: 2010–09
  7. By: Yi David Wang
    Abstract: This paper seeks to quantify existing financial barriers among East African Community (EAC) member countries based on analysis of each member country’s foreign exchange market. The primary contribution of this paper is the generation of an aggregate measure of financial barriers for the three relatively more advanced members (Kenya, Uganda, and Tanzania) using forward foreign exchange and interbank interest rate data. Its empirical results, which are corroborated by other evidence such as the levels of development of the financial markets and restrictions on capital flows, suggest that Kenya is the EAC’s most financially open country, followed by Uganda, and then Tanzania. The fact that the three countries exhibit different degrees of financial openness suggests that financial integration in the EAC region has a way to go.
    Keywords: Bank rates , Cross country analysis , East Asia , Economic integration , Exchange markets , Foreign exchange , Forward exchange rates , Kenya , Monetary unions , Tanzania , Uganda ,
    Date: 2010–08–23
  8. By: Beck, Thorsten; Cull, Robert; Fuchs, Michael; Getenga, Jared; Gatere, Peter; Randa, John; Trandafir, Mircea
    Abstract: Although Kenya's financial system is by far the largest and most developed in East Africa and its stability has improved significantly over the past years, many challenges remain. This paper assesses the stability, efficiency, and outreach of Kenya's banking system, usingaggregate, bank-level, and survey data. Banks'asset quality and liquidity positions have improved, making the system more resistant to shocks, and interest rate spreads have declined, in part due to reduction in the overhead costs of foreign banks. Outreach remains limited, but has improved in recent years, driven by mobile payments services in the domestic remittance market. Fostering a level regulatory playing field for all deposit-taking institutions is a key remaining challenge. Specifically, an effective but not overly burdensome framework for regulation and supervision of microfinance institutions and cooperatives is a priority. Maintaining an openness to new, and non-bank, providers of financial services, which has enabled the success of mobile payments, could also further outreach.
    Keywords: Banks&Banking Reform,Access to Finance,Debt Markets,Emerging Markets,Bankruptcy and Resolution of Financial Distress
    Date: 2010–10–01
  9. By: Hartwig, R.; Grimm, M.
    Abstract: In 2002 Malawi experienced a serious shortage of cereals due to adverse climatic conditions. The World Food Programme assumed that about 2.1 to 3.2 million people were threatened of starvation at that time. However, not much research has been undertaken to investigate the actual consequences of this crisis. In particular, little is known about how the crisis affected the health status of children. Obviously, quantifying the health impact of such a crisis is a serious task given the lack of data and the more general problem of relating outcomes to specific shocks and policies. In this paper a difference-in-difference estimator is used to quantify the impact of the food crisis on the health status of children. The findings suggest that at least in the short run, there was neither a significant impact on child mortality nor on malnutrition. This would suggest that the shock might have been less severe than initially assumed and that the various policy interventions undertaken at the time have been effective or at least sufficient to counteract the immediate effects of the crisis.
    Keywords: child mortality;malnutrition;food crisis;Malawi
    Date: 2010–01–01
  10. By: Wamuthenya, W.R.
    Abstract: Focusing on urban Kenya, this paper attempts to identify the sources of the temporal increase in women’s employment rate between 1986 and 1998. The paper relies on labour survey data, household responses to coping strategies and case studies. The analysis presented in the paper shows that the bulk of the increase in women’s insertion into the labour market comes from an increase in the work participation of married women. While women’s higher educational endowments, particularly the increase in secondary education, account for an improvement in their employment prospects, the period also witnesses a sharp decline in the importance given to education in determining employment and by 1998, university graduates were just as likely to be employed as individuals with no education. The period between 1986 and 1998 witnessed civil service reforms, restructuring of the private sector, firm closures and increasing job insecurity. Notwithstanding the role of education, declining opportunities for males, who in 1986 were the primary breadwinners and the accompanying income and employment insecurities within households seem to be the key factors prompting the sharp increase in the labour supply of (married) women. The analysis presented in this paper focused mainly on the period 1986 and 1998 and while more recent data would have provided an updated picture of the issues discussed in this paper, there is little evidence to suggest that the situation of women in Kenya’s labour market has changed substantially in recent years.
    Keywords: deteriorating economic conditions;urban households;coping strategies;women;employment rate;decomposition: composition and structural effects
    Date: 2010–04–01
  11. By: Issouf Samaké
    Abstract: This paper applies and extends a theoretical model built by Agénor and Montiel (2007) by exploring the effectiveness of government bonds and monetary policy in a small, open, credit-based economy with a fixed exchange rate. The model is applied to Benin, a member of a currency union, using a general equilibrium model with stochastic simulation. Model calibration replicates the historical pattern for 1996–2009. Policy experiments simulated an increase in government securities in Benin’s regional market and a cut in the reserve requirement. Simulations produced mixed results. It appears that, among other factors, excess bank liquidity lowers the effectiveness of monetary policy instruments through the credit channel and that government bonds can help mop up excess bank liquidity.
    Keywords: Benin , Bonds , Central bank policy , Credit , Economic models , Excess liquidity , Financial sector , Monetary policy , Monetary transmission mechanism , Monetary unions , Reserves , Sovereign debt , West African Economic and Monetary Union ,
    Date: 2010–08–19
  12. By: Debebe, Z.Y.
    Abstract: The author studies the effect of an agricultural shock and a labor sharing arrangement (informal social network) on child labor. Albeit bad parental preference to child labor (as the strand of literature claims), poor households face compelling situations to send their child to work. This is, especially, true when they are hit by an income shock and face a binding adult labor constraint. The author used panel data from the ERHS and employed a fixed effects model to pin down causal relation between shocks, membership in a labor sharing arrangement and child labor. It was found that child labor is, indeed, a buffer stock. Though a labor sharing arrangement doesnÂ’t affect child labor at normal times, it helps households to lessen the pressure to rely on it when hit by idiosyncratic shocks. While almost the whole effect of these shocks is offset by participation in a labor sharing arrangement, the covariate shock is not. Even if this may well affect a childÂ’s academic performance, school attendance doesnÂ’t decrease. This differential effect of shocks on child labor in participant households might be because of the extra adult labor made available or due to mutual support that comes with these social networks. This paper is indicative of the importance of considering social networks in smoothing out consumption. Further, it highlights the difficulty to cope up with covariate shocks and hence, calls for development interventions that are particularly meant to address their impact.
    Keywords: child labor;shocks;labor sharing;social networks;Ethiopia
    Date: 2010–01–01
  13. By: Wamuthenya, W.R.
    Abstract: Kenya has experienced a sharp decline in formal sector employment and a corresponding increase in informal sector employment. This paper examines the role played by various factors in influencing the sorting of individuals into different sectors of employment in urban Kenya. It examines whether factors influencing the location of individuals in different sectors change over time and differ across gender and thus contributes to an understanding of gender differences in job attainment. The paper complements the issues addressed in two other studies by the author on the remarkable rise in female Labour Force Participation Rate (LFPR) and on the gender gap in the incidence of unemployment. As may be expected, in both periods, experience and education are highly valued in the formal sector. Over time, the importance of education in securing labour market access increases by about 5 and 16 percentage points for primary and secondary education levels respectively. However, there are sharp gender differences. For men, the importance of education increases while for women it declines suggesting the presence of labour market segregation. Over time, the negative effect of marital status on female formal sector participation declines reflecting the increasing insertion of married women in the labour market. Underscoring the use of the informal sector as a last resort option, I find that declines in husbands’ real earnings are associated with a sharp increase in women’s participation in the informal sector. The increasing participation of women in the vulnerable informal sector is consistent with the feminist version of the structuralist characterisation of the informal sector.
    Keywords: formal sector;informal sector;education;gender;labour market segregation;feminist dualist and structuralist views
    Date: 2010–06–01
  14. By: Wamuthenya, W.R.
    Abstract: In recent years, there have been sharp changes in the Kenyan labour market. Most notably, Kenya has experienced a remarkable increase in female labour force participation in its urban areas over the period 1986 to 1998. The sharp increase in female LFPR has not been matched by an increase in their employment rate and consequently unemployment amongst women remains a pressing problem. In contrast, male unemployment rates are substantially lower and have not increased significantly over time. This paper uses data from two time periods, 1986 and 1998, to identify the factors that influence the likelihood of being unemployed and to examine why women are more vulnerable to unemployment than men are. Using a decomposition framework, the paper establishes whether the gender gap in unemployment is driven by differences in observable characteristics between women and men (a composition effect) or differences in the returns to these characteristics in the labour market (structural effect/discrimination). The analysis shows that the overall likelihood of being unemployed is heavily influenced by sex, marital status, household-headship and human capital characteristics such as experience and level of education. The decomposition estimates display that for both periods, gender gaps in unemployment are overwhelmingly, about 81 to 84 per cent, attributed to the composition effect.
    Keywords: unemployment;gender;decomposition;composition & structural effects;discrimination;household-headship
    Date: 2010–06–02
  15. By: Jens Hagen; Toman Omar Mahmoud; Natalia Trofimenko
    Abstract: Losing a parent is a trauma that has consequences for human capital formation. Does it matter at what age this trauma occurs? Using longitudinal data from the Kagera region in Tanzania that span thirteen years from 1991-2004, we find considerable impact heterogeneity across age at bereavement, but less so for the death of opposite-sex parents. In terms of long-term health status as measured by body height, children who lose their same-sex parent before teenage years are hit hardest. Regarding years of formal education attained in young adulthood, boys whose fathers die before adolescence suffer the most. Maternal bereavement does not fit into this pattern as it affects educational attainment of younger and older children in a similar way. The generally strong interaction between age at parental death and sex of the late parent suggests that the preferences of the surviving parent partly protect same-sex children from orphanhood’s detrimental effects on human capital accumulation
    Keywords: orphans, health, education, timing of parental death, child development, Tanzania
    JEL: I10 I21 J19 C23
    Date: 2010–09

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