nep-afr New Economics Papers
on Africa
Issue of 2010‒10‒23
fifteen papers chosen by
Quentin Wodon
World Bank

  1. Social protection in sub-Saharan Africa: Will the green shoots blossom? By Miguel Niño-Zarazúa; Armando Barrientos; David Hulme; Sam Hickey
  2. Bilateral and Regional Trade Agreements and Technical Barriers to Trade: An African Perspective By Nico Meyer; Tamas Fenyes; Martin Breitenbach; Ernst Idsardi
  3. Current poverty and income distribution in the context of South African history By Servaas van der Berg
  4. Politics, public expenditure and the evolution of poverty in Africa 1920-2009 By Sue Bowden; Paul Mosley
  5. Financial Development and Income Inequality: Evidence from African Countries By Enowbi Batuo, Michael; Guidi, Francesco; Mlambo, Kupukile
  6. Fertility impact of social transfers in Sub-Saharan Africa – What about pensions? By Göran Holmqvist
  7. A History with Evidence: Income inequality in the Dutch Cape Colony By Johan Fourie; Dieter von Fintel
  8. Food Prices in Six Developing Countries and the Grains Price Spike By Christopher L. Gilbert
  9. China, India, Brazil and South Africa in the World Economy: Engines of Growth? By Deepak Nayyar
  10. Income Distribution and Growth’s Ability to Reduce Poverty: Evidence from Rural and Urban African Economies By Fosu, Augustin K.
  11. A Lost Generation? Long Term Socioeconomic Outcomes in Orphans By Carlos Bozzoli
  13. Small Enterprise Growth and the Rural Investment Climate: Evidence from Tanzania By Kinda, Tidiane; Loening, Josef
  14. Poverty traps and livelihood options in rural Zimbabwe:Evidence from three districts By Blessing M. Chiripanhura
  15. Is household income diversification a means of survival or a means of accumulation? Panel data evidence from Tanzania By Ralitza Dimova; Kunal Sen

  1. By: Miguel Niño-Zarazúa; Armando Barrientos; David Hulme; Sam Hickey
    Abstract: This paper provides an overview of the recent extension of social protection in sub- Saharan Africa. It identifies two main ‘models’ of social protection in the region: the Southern Africa and Middle Africa models. It then assesses the contrasting policy processes behind these models and examines the major challenges they face as regards financing, institutional capacity and political support. It concludes that, for an effective institutional framework for social protection to evolve in sub-Saharan African countries, the present focus on the technical design of social protection programmes needs to be accompanied by analyses that contribute to also ‘getting the politics right’.
    Date: 2010
  2. By: Nico Meyer; Tamas Fenyes; Martin Breitenbach; Ernst Idsardi
    Abstract: Regional trade agreements (RTAs) present opportunities for controlling technical barriers to trade (TBTs). Using key principles and provisions of the WTO Agreement on TBT as a yardstick for analysis, this paper examines whether and how eight major regional integration agreements within the African region address TBT issues. It finds that TBT are not an important issue in Sub-Saharan African RTAs. Only one of the 8 agreements surveyed refers explicitly to the WTO TBT Agreement. Existing provisions for eliminating TBT-related barriers or harmonising legitimate technical regulations are formulated mostly in broad and nonprescriptive terms. The paper describes concrete steps that parties to these RTAs have taken in order to reduce technical barriers. Such initiatives have been taken at the national level but can also involve collaboration between RTAs. Country case studies show that weak TBT infrastructure remains a handicap for businesses and governments and that, with the exception of the Southern African Development Cooperation (SADC), investment by regional economic communities (RECs) in institutional infrastructure related to TBT has not been significant. The paper describes in some detail relevant activities taking place within SADC which could serve as a best-practice model for other African regional agreements. Serious capacity constraints stand in the way of African countries taking on the challenge of reducing TBT barriers. Also, low local levels of living standards favour weak product standard, and this acts as a barrier to upgrading product standards for export markets. Amending TBT coverage in African RTAs, a review of performance of enquiry points and assistance with infrastructure modernisation are among a set of measures recommended for achieving better TBT policy alignment among countries of the region.
    Keywords: trade barriers, standards, RTA, regional trade agreements, technical barriers to trade, TBT, technical regulations, conformity assessment procedures, harmonisation, South Africa, Sub-Sahara Africa, technical barriers, free trade agreement, FTA, regional economic community, WTO Agreement on TBT, mutual recognition, West African Economic and Monetary Union, Economic Community of West African States, Central African Economic and Monetary Union, East African Community, Southern African Development Community, South African-EU Trade and Development Cooperation Agreement, Kenya, Nigeria
    Date: 2010–06–02
  3. By: Servaas van der Berg (Department of Economics, University of Stellenbosch)
    Abstract: This paper describes and analyses current poverty and income distribution in South Africa, with a central concern the relationship between poverty, inequality and growth. The paper also investigates patterns of and trends in poverty and income distribution, a literature with a long and distinguished history. Drawing from recent literature in this regard, the paper shows that the labour market – rather than access to wealth or to political and fiscal power – currently sets the limits to redistribution. Wage inequality, deeply rooted in South Africa’s history, plays a central role in overall income distribution, and patterns of human capital development are fundamental to the future growth path and therefore to poverty and income distribution. The paper therefore concludes that reducing inequality substantially is currently unlikely without a massive increase in the human capital of those presently poor, but that prospects in this regard are inauspicious.
    Keywords: South Africa, poverty, income distribution, labour market
    JEL: O15 D31 D63 J31 N37
    Date: 2010
  4. By: Sue Bowden; Paul Mosley
    Abstract: We investigate the historical roots of poverty, with particular reference to the experience of Africa during the 20th century. We find that institutional inheritance is an important influence on current underdevelopment; but in addition, we argue that the influence of policies on institutions is highly significant, and that in Africa at least, a high representation of European settlers in land ownership and policy-making was a source of weakness, and not of strength. We argue this thesis, using mortality rates as a proxy for poverty levels, with reference to two settler colonies – Zimbabwe and Kenya – and two peasant export colonies – Uganda and Ghana. Our findings suggest that in Africa, settler-type political systems tended to produce highly unequal income distributions and, as a consequence, patterns of public expenditure and investment in human and infrastructural capital which were strongly biased against smallholder agriculture and thence against poverty reduction. Peasant-export type political systems, on the other hand, produced more equal income distributions, whose policy structures and, consequently, production functions were less biased against the poor. As a consequence, liberalisation during the 1980s and 1990s produced asymmetric results, with poverty falling sharply in the ‘peasant export’ systems, and rising in settler economies. These contrasts in the evolution of poverty in the late 20th and early 21st centuries, we argue, can only be understood by reference to differences between the settler and peasant export economies, whose roots lie in political decisions taken 100 years previously.
    Date: 2010
  5. By: Enowbi Batuo, Michael; Guidi, Francesco; Mlambo, Kupukile
    Abstract: This paper present empirical evidence on how financial development is related to income distribution in a panel data set covering 22 African countries for the period between 1990 to 2004. A dynamic panel estimation technique (GMM) is employ and the findings indicate that income inequality decrease as economies develop their financial sector, which is consistent with the bulk of theoretical and empirical research. The result also confirm that educational attainment play a significant role in making income distribution more equal. We also find no evidence supporting the Greenwood-Jovanovic hypothesis of an inverted-U- shaped relationship between financial sector development and inequality.
    Keywords: Financial development; income inequality; Africa G20; D63; 055
    JEL: D63 O55 G2
    Date: 2010–08
  6. By: Göran Holmqvist
    Abstract: The potential link between child-related cash transfers and increased fertility is often raised as an issue of concern when debating their use. Old-age pension is a form of cash transfer where theory would suggest the opposite impact, i.e. pensions equal decreasing fertility. A handful of Sub-Saharan African countries have introduced non-contributory social pensions that cover the great majority of the older population. It makes them into a distinct group in relation to the rest of the region where public old-age security arrangements, if existing at all, are largely reserved for the formal sector. This paper attempts to trace any impact these high-coverage pension schemes may have had on fertility. Findings suggest that there has been such an impact, in the range of 0,5 to 1,5 children less per woman depending on model specification.
    Date: 2010
  7. By: Johan Fourie (Department of Economics, University of Stellenbosch); Dieter von Fintel (Department of Economikcs, University of Stellenbosch)
    Abstract: The arrival of European settlers at the Cape in 1652 marked the beginning of what would seemingly become an extremely unequal society, with ramifications into modern-day South Africa. In this paper, we measure the income inequality at three different points over the first century of Dutch rule at the Cape. What emerges from the study is a society characterised by severe inequality, with a relatively (and increasingly) poor farming population combined with pockets of wealth. The inequality is driven largely by wheat and, especially, wine production, which gave rise to an elite. Historical evidence supports our findings: Amongst others, the imposition of sumptuary laws in 1755 is closely correlated with a more segmented elite which includes both alcohol merchants and (wine) farmers. We compare these measures to those of other regions and time-periods in history. Although the exact level of inequality is determined to a large extent by our assumptions, the Cape Colony registers one of the highest Gini-coefficients in pre-industrial societies. This provides some support to verify the Engerman-Sokoloff hypothesis that initial levels of high inequality would give rise to growth-debilitating institutions, resulting in higher inequality and underdevelopment.
    Keywords: South Africa, VOC, Gini, wealth, comparative, Kuznets, Williamson
    JEL: N37 D31 D63
    Date: 2010
  8. By: Christopher L. Gilbert
    Abstract: The paper analyzes the pass-through of world maize and rice prices in six developing countries (Benin, Kenya, Malawi, Nepal, Peru and Vietnam) both at the national and sub-national (regional) levels with the view of considering the relevance of world prices for national prices (high for maize, low for rice) and the representativeness of national average prices for prices throughout the country (high in Kenya and Malawi, low in Peru). The variability of prices across regions generally, but not invariably, increases when prices are high. Kenya and Vietnam have been relatively successful and Malawi least successful in insulating consumers from volatility in world prices.
    Date: 2010
  9. By: Deepak Nayyar
    Abstract: This paper attempts to analyse the economic implications of the rise of China, India, Brazil and South Africa, for developing countries situated in the wider context of the world economy. It examines the possible impact of their rapid growth on industrialized countries and developing countries, which could be complementary or competitive and, on balance, positive or negative. In doing so, it considers the main channels of transmission, to focus on international trade, investment, finance and migration. The essential question is whether, in times to come, these four countries could be the new engines of growth for the world economy. [Discussion Paper No. 2008/05]
    Keywords: China, India, Brazil, South Africa, growth, development, history, trade, investment, finance, migration
    Date: 2010
  10. By: Fosu, Augustin K.
    Abstract: The present study examines the degree to which income distribution affects the ability of economic growth to reduce poverty, based on 1990s data for a sample of rural and urban sectors of African economies. Using the basic needs approach, an analysis-ofcovariance model is derived and estimated, with the headcount, gap and squared gap poverty ratios serving as the respective dependent variables and the Gini coefficient and PPP-adjusted incomes as explanatory variables. The study finds that the responsiveness of poverty to income growth is a decreasing function of inequality, albeit at varying rates for the three poverty measures: lowest for the headcount, followed by the gap and fastest for the squared gap. The ranges for the income elasticity in the sample are estimated at: 0.02-0.68, 0.11-1.05 and 0.10-1.35, respectively, for these poverty measures. Furthermore while, on average, the responsiveness of poverty to income growth appears to be the same between the rural and urban sectors, there are substantial sectoral differences across countries. The results suggest the need for country-specific emphases on growth relative to inequality, with special attention accorded the possible rural-urban dichotomy.
    Keywords: Income distribution, income growth, poverty, rural and urban African economies
    Date: 2010
  11. By: Carlos Bozzoli
    Abstract: Previous research on orphanhood has established that parental death has a negative effect in terms of school enrollment and grade progression, but the relation between orphanhood and socioeconomic outcomes in young adults has been largely ignored in the literature. In this paper, I use a longitudinal survey from the city of Cape Town, South Africa to evaluate two main outcomes of young adults, namely labor market attachment and fertility, and its relation to orphanhood status. The uniqueness of this dataset lies within the combination of different survey waves with a year-by-year life history that records key outcomes (e.g. schooling, work, fertility outcomes). It also provides information on so-called "parental investments" (time and material support),family background, and literacy and numeracy test scores. I find that although preexisting parental background characteristics and literacy and numeracy skills are comparable between orphans and non-orphans, the latter are less likely to be employed(true primarily for males) or to have children (females) early in their lives. Evidence ismixed regarding whether orphans earn lower wages than non-orphans. These results suggest that orphanhood may not only alter educational achievements, but that it may also leave a long-lasting "imprint" in terms of employment and fertility patterns.
    Keywords: Orphans, employment, wages, fertility, parental investments
    JEL: J12 J13 J22 O12
    Date: 2010
  12. By: Steven F. Koch (Department of Economics, University of Pretoria)
    Abstract: The research presented here considers the performance of the Fractional Multinomial Logit (FMNL) model in explaining expenditure shares using data from the 2005/06 South African Income and Expenditure Survey. The results suggest that the FMNL performs favourably, when the dataset is large enough, but that it does not perform as well, when the dataset is limited. Expenditure elasticities were also estimated, and compared to the expenditure shares from a QUAIDS model. The resulting expenditure shares are fairly similar across model specification; however, the FMNL model does incorporate additional curvature, which is easily observed when comparing the QUAIDS elasticities to the FMNL elasticities.
    Keywords: Expenditure Shares, Multinomial Fractional Logit.
    Date: 2010–10
  13. By: Kinda, Tidiane; Loening, Josef
    Abstract: This paper analyzes characteristics of nonfarm enterprises, their employment growth patterns, and constraints in doing business in rural Tanzania. Using unique survey data, the we describe a low-return sector struggling to compete in a challenging business environment. However, about one-third of rural enterprises are growing fast. Most enterprises engage in agricultural trade. Due to a rapidly growing agricultural sector in recent years, limiting demand-side constraints, rural enterprise constraints in Tanzania mainly operate from the supply side, suggesting that in particular access to finance, road infrastructure, and rural cell phone communication is associated with employment growth. A major finding is that subjective and objective measurements of business constraints are broadly comparable. We discuss a number of factors that would help to unleash the full potential of private sector-led growth in rural areas. Marginal improvements in the rural investment climate matter for growth.
    Keywords: Labor markets; rural investment climate; enterprise growth; Tanzania
    JEL: J08 L25 O55
    Date: 2010–03–08
  14. By: Blessing M. Chiripanhura
    Abstract: This paper analyses poverty in three districts of Zimbabwe. It uses household data to argue that there are two dominant poverty traps individually and jointly afflicting households. It argues that asset poverty is less severe than income poverty. It further argues that assets indicate potential for future production, especially in the context of employment opportunities for the poor, and that this is the most potent and cost-effective strategy to fight poverty. It concludes by estimating household demand for labour, concluding that increasing non-farm incomes and ownership of a minimum bundle of productive assets is necessary for long-term poverty reduction.
    Date: 2010
  15. By: Ralitza Dimova; Kunal Sen
    Abstract: What drives income diversification among rural households in developing countries? A large literature has examined whether household income diversification is a means of survival or a means of accumulation, which has so far remained inconclusive. This paper attempts to evaluate which explanation of household income diversification – diversification as survival or diversification as accumulation – stands up to empirical scrutiny. We use household panel data from Tanzania of approximately 800 households for four years and use fixed and random effects models to sweep out unobserved households’ attitudes to risk that may be correlated with household income diversification behaviour. We also use instrumental variable methods to address the possibility of reverse causality and that the household’s income status may be endogenous to its diversification behaviour. Our results suggest that the ‘diversification as accumulation’ motive of household income diversification seems to have stronger empirical validity in the Tanzanian context.
    Date: 2010

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