nep-afr New Economics Papers
on Africa
Issue of 2010‒11‒06
twelve papers chosen by
Quentin Wodon
World Bank

  1. Trees, tenure and conflict: Rubber in colonial Benin By Fenske, James
  2. Are poor households credit-constrained or myopic? Evidence from a South African panel. By Erlend Berg
  3. Colonial Rule, Apartheid and Natural Resources: Top Incomes in South Africa 1903-2005 By Facundo Alvaredo; Anthony B Atkinson
  4. Drought and Civil War in Sub-Saharan Africa By Mathieu Couttenier; Raphael Soubeyran
  5. Agricultural Distortions in Sub-Saharan Africa: Trade and Welfare Indicators, 1961 to 2004. By Johanna Croser; Kym Anderson
  6. Governance and Oil Revenues in Cameroon By Bernard Gauthier; Albert Zeufack
  7. Gender, Social Norms and Household Production in Burkina Faso. By Harounan Kanzianga; Zaki Wahhaj
  8. The Jatropha Biofuels Sector in Tanzania 2005-9: Evolution Towards Sustainability? By Marjolein C.J. Caniëls; Henny Romijn
  9. Consumption risk, technology adoption and poverty traps: evidence from Ethiopia.. By Dercon, Stefan; Christiaensen, Luc
  11. Money demand stability: A case study of Nigeria By Saten Kumar; Don J. Webber; Scott Fargher
  12. Harnessing Resource Revenues for Prosperity in Zambia By Christopher Adam; Anthony Simpasa

  1. By: Fenske, James
    Abstract: Tree crops have changed land tenure in Africa. Planters have acquired more permanent, alienable rights, but have also faced disputes with competing claimants and the state. I show that the introduction of Para rubber had similar effects in the Benin region of colonial Nigeria. Planters initially obtained land by traditional methods. Mature plantations were assets that could be sold, let out, and used to raise credit. Disputes over rubber involved smallholders, communities of rival users, would-be migrant planters, commercial plantations, and the colonial state, which feared rubber would make land unavailable for food crops.
    Keywords: Africa; rubber; land tenure; Benin; Nigeria; tree crops; land disputes
    JEL: N57 O10
    Date: 2010–10
  2. By: Erlend Berg
    Abstract: Credit constraints are an almost ubiquitous assumption in development economics. Yet direct evidence for credit constraints is limited, and many observations consistent with credit constraints are equally compatible with precautionary saving or myopic (non-forward-looking) consumption. Using household panel data and a source of widely anticipated income in South Africa, this paper first tests and rejects the standard consumption model with perfect capital markets. The standard model enriched with credit constraints is then contrasted with precautionary saving and myopic consumption as alternative explanations for the observed expenditure pattern. The standard model with credit constraints cannot be rejected in favour of precautionary saving or myopic consumption.
    Date: 2010
  3. By: Facundo Alvaredo; Anthony B Atkinson
    Abstract: There have been important studies of overall income inequality and of poverty in South Africa. In this paper, we approach the subject from a different direction: the extent and evolution of top incomes. We present estimates of the shares in total income of groups such as the top 1 per cent and the top 0.1 per cent, covering, with gaps, more than a hundred years. In order to explain the observed dynamics, here we consider —in a preliminary way— three factors: the transfer of political authority, racial discrimination, and the rich mineral resources. The estimates of top income shares for recent years bear out the picture of South Africa as a highly unequal country..
    Keywords: Natural Resources, Colonial Rule, Apartheid, South Africa, top incomes.
    JEL: C72 D74
    Date: 2010
  4. By: Mathieu Couttenier; Raphael Soubeyran
    Abstract: In this paper, we show that drought has a positive effect on the incidence of civil war over the 1945-2005 period in Sub-Saharan Africa. We use the Palmer Drought Severity Index which is a richer measurement of drought than the measures used in the literature (rainfall and temperature) as it measures the accumulation of water in the soil in taking into account the temperature and the geological characteristics of the soil. We show that the risk of civil war increases by more than 42% from a “normal” climate to an “extremely drought” climate. Surprisingly, only 2.5% of this effect is channeled through economic growth.
    Date: 2010–10
  5. By: Johanna Croser (School of Economics, University of Adelaide); Kym Anderson (School of Economics, University of Adelaide)
    Abstract: For decades, agricultural price and trade policies in Sub-Saharan Africa hampered farmersÂ’ contributions to economic growth and poverty reduction. While there has been much policy reform over the past two decades, the injections of agricultural development funding, together with on-going regional and global trade negotiations, have brought distortionary policies under the spotlight once again. A key question asked of those policies is: how much are they still reducing national economic welfare and trade? Economy-wide models are able to address that question, but they are not available for many poor countries. Even where they are, typically they apply to just one particular previous year and so are unable to provide trends in effects over time. This paper provides a partial-equilibrium alternative to economy-wide modelling, by drawing on a modification of so-called trade restrictiveness indexes to provide theoretically precise indicators of the trade and welfare effects of agricultural policy distortions to producer and consumer prices over the past half-century. We generate time series of country level indices, as well as Africa-wide aggregates. We also provide annual commodity market indices for the region, and we provide a sense of the relative importance of the key policy instruments used.
    Keywords: Distorted incentives; agricultural price and trade policies; trade restrictiveness index
    JEL: F13 F14 F15 N57 Q17 Q18
    Date: 2010–03
  6. By: Bernard Gauthier; Albert Zeufack
    Abstract: Oil has been a curse for Cameroon, one of the potentially richest countries in Sub-Saharan Africa. While the discovery of oil in 1977 and initial prudent management accentuated hopes, Cameroon has become an example of growth collapse. GDP contracted by 5% on average per year, a combined 27% over the 8-year period, dropping per capita income in 1993 to half of its 1986 level. In 2007, Cameroon was still poorer than in 1985. Using recently available datasets on oil production, the World Bank’s Adjusted Savings data, and building on recent literature (Cossé 2006), this paper estimates the oil rent effectively captured by Cameroon since 1977 and analyzes factors explaining the aggregate savings and spending decisions from the oil rent that led to such poor development outcomes. The paper finds that Cameroon may have captured a sizeable portion of its oil rent – around 67%. However, only about 46% of total oil revenues accruing to the government between 1977 and 2006 may have been transferred to the budget. The remaining 54% are not properly accounted for. The paper argues that poor governance is the culprit. The decision to “save” Cameroon’s oil revenues abroad proves to have been sub-optimal given the lack of a transparent and accountable framework to manage them and the poor governance record of the country.The lack of transparency and accountability in oil revenues management has translated into a failure to engage in medium to long term development planning for the country. Donors have been pushing for improved governance and transparency in the oil sector for the past 20 years without significant success. The EITI, while a good initiative, is also in high risk of capture. The paper suggests changes in the incentives structure to reduce collusion and improve governance.
    Keywords: Cameroon, growth collapse, GDP, Adjusted Savings data, oil rent, poor governance
    JEL: Q32 O41
    Date: 2010
  7. By: Harounan Kanzianga; Zaki Wahhaj
    Abstract: Empirical studies of intra-household allocation has revealed that, in many instances, gender is an important determinant in the allocation of resources within the household. Yet, within the theoretical literature, why gender matters within the household remains an open question. In this paper, we propose a simple model of intra-household allocation based on a particular social institution for the organisation of agricultural production practised among certain ethnic groups in West Africa. We highlight how this institution, while resolving certain problems of commitment and informational asymmetry, can also lead to a gendered pattern in the allocation of productive resources and consumption within the household. Using a survey of agricultural households in Burkina Faso, we show, consistent with this theory, that plots owned by the head of the household are farmed more intensively, and achieves higher yields, than plots with similar characteristics owned by other household members. Male and female family members who do not head the household achieve similar yields. We argue that the higher yields achieved by the household head may be explained in terms of social norms that require him to spend the earnings from some plots under his control exclusively on household public goods, which in turn provides other family members the incentive to voluntarily contribute labour on his farms. Using expenditures data, and measures of rainfall to capture weather-related shocks to agricultural income, we show that the household head has, indeed, a higher marginal propensity to spend on household public goods than other household members. The fact that the head of the household is usually male accounts for the gendered pattern in labour allocation and yields across different farm plots.
    JEL: O12 D13 Q1
    Date: 2010
  8. By: Marjolein C.J. Caniëls; Henny Romijn
    Abstract: Biofuel production has recently attracted a great deal of attention. Some anticipate substantial social and environmental benefits, while at the same time expecting sound profitability for investors. Others are more doubtful, envisaging large trade-offs between the pursuit of social, environmental and economic objectives, particularly in poor countries in the tropics. The paper explores these issues in Tanzania, which is a forerunner in Africa in the cultivation of a bio-oil shrub called Jatropha curcas L. We trace how isolated Jatropha biofuel experiments developed since their inception in early 2005 towards a fully fledged sectoral production and innovation system; and investigate to what extent that system has been capable of developing ànd maintaining sustainable practices and producing sustainable outcomes. The application of evolutionary economic theory allows us to view the development processes in the sector as a result of evolutionary variation and selection on the one hand, and revolutionary contestation between different coalitions of stakeholders on the other. Both these processes constitute significant engines of change in the sector. While variation and selection is driven predominantly by localised learning, the conflict-driven dynamics are highly globalised. The sector is found to have moved some way towards a full sectoral innovation and production system, but it is impossible to predict whether a viable sector with a strong “triple bottom line” orientation will ultimate emerge, since many issues surrounding the social, environmental and financial sustainability still remain unresolved.
    Keywords: biofuels, evolutionary theory, innovation systems, sustainability, stakeholder conflict, learning, Tanzania.
    JEL: O30 R10
    Date: 2010–06
  9. By: Dercon, Stefan; Christiaensen, Luc
    Abstract: Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just exante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertiliser. The lack of insurance causes inefficiency in production choices.
    JEL: O12 Q12 O33 Q16
    Date: 2010
  10. By: Niek Schoeman (Department of Economics, University of Pretoria); Yolande van Heerden (Department of Economics, University of Pretoria)
    Abstract: The use of micro-simulation tax modelling techniques is reasonably well-documented in a broad spectrum of literature in the field of public economics. This article is primarily concerned with assessing the revenue base for individuals by means of such a micro-simulation tax model, using the 2005/2006 Income and Expenditure survey. The challenge was to structure the model in such a way that differences in individual behaviour, the economic environment and the income levels of individuals be captured to reflect the true national economy. The model developed is an extension of the MS model framework as structured by Thompson and Schoeman (2006) as well as Wilkinson (2009). It is different though in the sense that StatsSa data is aligned with published data from the South African Revenue Services (SARS). Given the scarcity of data (limited surveys) this model is a static model assuming that the population characteristics do not change significantly over the period of the analysis and that it remains useful in the short term. The structured model applies a tax calculator to compute the tax liability for each individual under the 2005/2006 tax regulations and rules. The results based on IES data is then benchmarked against the latest available published SARS data in the bulletin Tax Statistics (2009) and the relevant data in the latest (2010) publication Budget Review from the National Treasury. An analysis based on unadjusted data from the IES shows a substantial difference in tax liability compared to official tax figures published by SARS (R65 billion compared to the SARS figure of R101 billion for the 2005/06 IES survey3 year). After benchmarking critical values and the imputation of missing data the numbers are now much closer (R105 billion compared to the SARS R101 billion). The analysis is concluded with some policy scenarios showing the impact of a change in marginal tax rates and the tax threshold. The results highlight the sensitivity of high income earners to changes in tax policy.
    Keywords: Micro-simulation, Tax revenue base, Personal income tax
    JEL: D31 H24
    Date: 2010–10
  11. By: Saten Kumar (Department of Business Economics, Auckland University of Technology); Don J. Webber (Department of Business Economics, Auckland University of Technology and Department of Economics, UWE, Bristol); Scott Fargher (Department of Business Economics, Auckland University of Technology)
    Abstract: This paper presents an empirical investigation into the level and stability of money demand (M1) in Nigeria between 1960 and 2008. In addition to estimating the canonical specification, alternative specifications are presented that include additional variables to proxy for the cost of holding money. Results suggest that the canonical specification is well-determined, the money demand relationship went through a regime shift in 1986 which slightly improved the scale economies of money demand, and money demand is stable. These findings imply that Nigeria could effectively use the supply of money as an instrument of monetary policy.
    Keywords: Money demand; Structural breaks; Cointegration; Monetary policy
    JEL: E41 C22
    Date: 2010–10
  12. By: Christopher Adam; Anthony Simpasa
    Abstract: This paper examines the macroeconomic management of Zambia’s natural resource endowment over the past century. We describe how the state has adopted different strategies to secure a share of the rents from copper mining, how these strategies have affected incentives for exploration and production and how the associated macroeconomic policy regimes have shaped the value and distribution of the natural resource rents. We focus principally on the shift from public back to private ownership and control of the sector that took place at the end of the 1990s and on how the terms of the privatization affected the impact of the commodity price boom of 2003-08 on the domestic economy. We suggest that while the state and people of Zambia captured a nugatory share of the rents accruing from this boom, high levels of investment in the sector, combined with recent reforms to the mining taxation regime and in the conduct of macroeconomic policy have left Zambia better-placed to benefit from future growth in the copper sector.
    Keywords: Zambia, macroeconomic management, copper mining, rents, natural resources, private ownership, commodity price
    JEL: Q30
    Date: 2010

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