nep-afr New Economics Papers
on Africa
Issue of 2011‒04‒30
twelve papers chosen by
Quentin Wodon
World Bank

  1. MDGs: Sub-Saharan Africa: Overcoming Data Gaps and Ranking Progress By Gonzalo Duenas Alvarez; Mary Tran; Raj Raina
  2. Economies of Scale and Pension Fund Plans: Evidence from South Africa By Albert Touna Mama; Neryvia Pillay; Johannes W. Fedderke
  4. Inflation Targeting in Brazil, Chile and South Africa: An Empirical Investigation of Their Monetary Policy Framework By Mona Kamal
  5. Settler skills and colonial development By Johan Fourie; Dieter von Fintel
  6. Unlocking Productive Entrepreneurship in Ethiopia: Which Incentives Matter? By Zuzana Brixiova; Emerta Asaminew
  7. Sectoral Strategy and Poverty: the Case of Togo. Stratégie sectorielle et pauvreté: cas du Togo. By Akoété Ega Agbodji; Koffi Yovo; Kodjo Abalo; Komlan Dodzi Agbodji; Ablamba Ahoéfavi Johnson
  8. Cropping practices and labor requirements in field operations for major crops in Ghana: What needs to be mechanized? By Ngeleza, Guyslain K.; Owusua, Rebecca; Jimah, Kipo; Kolavalli, Shashidhara
  9. Economic development and environmental quality in Nigeria: is there an environmental Kuznets curve? By Chuku, Agbai
  10. Intercommodity price transmission and food price policies: An analysis of Ethiopian cereal markets By Rashid, Shahidur
  11. Farm households' preference for cash-based compensation versus livelihood-enhancing programs: A choice experiment to inform avian flu compensation policy in Nigeria By Oparinde, Adewale; Birol, Ekin
  12. Censored Demand System Estimation with Endogenous Expenditures in clustered samples: an application to food demand in urban Mozambique By Mikkel Barslund; ;

  1. By: Gonzalo Duenas Alvarez (Fordham University); Mary Tran (New York University); Raj Raina (Columbia University)
    Date: 2011
  2. By: Albert Touna Mama; Neryvia Pillay; Johannes W. Fedderke
    Abstract: The focus of this paper is on the presence of economies of scale in administering pension funds. We make use of a unique dataset with extensive information on South African retirement funds from 1996 to 2006. For almost fifty years now, South Africa has operated under a system with small social security beneÂ…ts but with considerable options and freedom to long-term savers. The dataset contains aggregate information for various fund types, fund classes, as well as different benefit structures. Estimates of a translog cost function provide evidence of unused economies of scale in the industry. We also find that established funds have a substantial cost-advantage over young funds.
    Keywords: Economies of scale; DeÂ…ned contribution; Pay as you go; Learning-by-doing; Annuitization
    JEL: G23 H55 L13
    Date: 2011
  3. By: Zuzana Brixiová; Léonce Ndikumana; Kaouther Abderrahim
    Abstract: The objective of this paper is to discuss macroeconomic policies that would help African countries, especially the low income countries, reach strong, sustained and shared growth in the post-crisis world. The paper first reviews, with a special focus on LICs, macroeconomic policies in Africa prior to the crisis. It then discusses factors behind ‘the Africa surprise’ that is the continent’s overall good performance during the crisis and relatively fast recovery. It underscores that in the aftermath of the crisis, the emphasis of the macroeconomic policy needs to shift from the objective of very low inflation that predominated prior to the crisis towards growth. Fiscal policy is key in this regard, through public outlays on infrastructure anchored in the medium term expenditure frameworks that would also have a counter-cyclical role. Where conditions allow, frontier market LICs may want to consider adopting flexible inflation targeting frameworks that would provide sufficient room for expansion of credit to the private sector.
    Keywords: macroeconomic policies, growth, capital flows, Africa
    JEL: E5 F43 O11 O47
    Date: 2011–01–01
  4. By: Mona Kamal
    Abstract: This paper tackles the monetary policy performance in Brazil, Chile and South Africa under inflation targeting framework. Furthermore, it provides an empirical assessment through using the unrestricted Vector Auto-regression (VAR) and Structural Vector Auto-regression (SVAR) approaches depending on data spans the period from the first quarter of 1970 to the fourth quarter of 2007. On the other hand, it utilizes the Likelihood Ratio (LR) Statistic to test for possible structural changes due to the adoption of inflation targeting regime in those countries. The main findings are as follows: inflation targeting does make a difference in the performance of monetary policy in those countries. Furthermore, the experience of Brazil, Chile and South Africa provides important lessons for other emerging market economies to adopt such a framework.
    Keywords: Monetary policy, Vector Auto-regression (VAR), Structural Vector Auto-regression (SVAR) approach, Inflation Targeting Framework.
    JEL: E52 E58
    Date: 2010–11–01
  5. By: Johan Fourie; Dieter von Fintel
    Abstract: The emphasis on location-specific factors, such as climate or disease environment, in the explanation of development outcomes in colonial societies implicitly assumes that settler groups were homogenous. Using tax records, this paper shows that the French Huguenots who immigrated to Dutch South Africa at the end of the 17th century were more productive wine-makers than the already-established non-French farmers. Standard factors of production usually associated with faster growth do not explain the differences between the two groups. We posit that the skills of the Huguenots — the ability to make quality wines — provided a sustainable competitive advantage that not only explains initial but persistent productivity differences. We test this hypothesis by dividing the French settlers into two groups — those originating from wine regions, and those from wheat regions — and comparing them with other settler groups. Potential differences between the French (overall) and the Dutch may be attributable to institutional and cultural differences, while variations within the French group are more likely to be skill-related. This intuitive but important insight — that home-country production determines settler-society productivity, even in later generations — sheds new light on our understanding of how newly settled colonial societies develop, and of the importance of knowledge and skills in economic growth.
    Keywords: South Africa, Cape Colony, French Huguenots, VOC, wine, slaves
    JEL: N37 D31 D63
    Date: 2011
  6. By: Zuzana Brixiova; Emerta Asaminew
    Abstract: Twenty years after the launch of market reforms, productive entrepreneurship and vibrant small and medium-sized enterprises (SMEs) in Ethiopia remain limited, the recent growth acceleration notwithstanding. This paper develops a model of entrepreneurial start ups in an economy with frictions in the product and labor markets and a large informal sector, which characterize the Ethiopian institutional landscape. It then examines several mitigating policies that could improve the suboptimal outcomes. The main findings are that search subsidies would be more effective in encouraging entrepreneurial start ups than wage subsidies, although fewer entrepreneurs may choose to operate in the formal sector than under the latter. Regarding the reform agenda,priority should be put on removing rigidities and establishing property rights. To be effective,both types of subsidies should have a time limit and be phased out with reforms of the business environment, strengthened property rights, and improved labor markets.
    Keywords: Model of skills and start ups, labor markets, frictions, informal sector, Africa
    JEL: L26 J24 J48 O17
    Date: 2010–10–01
  7. By: Akoété Ega Agbodji; Koffi Yovo; Kodjo Abalo; Komlan Dodzi Agbodji; Ablamba Ahoéfavi Johnson
    Abstract: A general calculable equilibrium model, calibrated using the 2000 SAM, was developed to analyze the possible effects of an external price shock and the effects of a sectoral investment strategy on the distribution of income in Togo in the context of the PRSP. Analysis of the SAM was used to highlight the importance of food production in the creation and distribution of income in Togo. This sector contributes 20% of the country’s value added, 67 percent of which is paid to informal labour in the form of wages. Given that poverty is most prevalent in rural areas, where there is a 74.3 percent incidence of poverty as opposed to 36.8 percent for urban areas, it is reasonable for the government to make improved productivity and the creation and distribution of wealth in rural areas a national priority. The effects of a ten percent increase in capital in both food and cash crop farming are as follows: (i) an increase in value added and production, along with a decrease in agricultural prices; (ii) improved price-competitiveness for the economy; (iii) an increase in final consumption and net exports, resulting in an expansion of GDP; (iv) an increase in real wages for informal labour, which is heavily used in the agricultural sector, along with lower wages in the formal sector; and (v) higher real income and welfare for households. This analysis thus confirms that increasing investment in agriculture, particularly for food crops, could improve the distribution of income and welfare in rural areas. Moreover, the simulation of a ten percent increase in export prices for cash crops, textiles, and fats and oils reveals non negligible macroeconomic and sectoral effects as well as improved welfare.
    Keywords: Poverty, government strategies, CGE models
    JEL: I32 I38 C68
    Date: 2011
  8. By: Ngeleza, Guyslain K.; Owusua, Rebecca; Jimah, Kipo; Kolavalli, Shashidhara
    Abstract: This study is to examine the labor requirements associated with different cropping systems in Ghana in order to guide the prioritization of investments in mechanization in the country. First, major cropping systems are identified in the country by adopting the cropping pattern approach of Ruthenberg (1983), who defined farming systems according to the leading crop activities. Second, labor requirements and costs of production of crops in the various systems are examined at various levels of substitution of either herbicides or animal and mechanical traction for labor. We found that the total labor requirements varied among cropping systems. The requirements were particularly high in the two cocoa cropping systems in the forest zones. The requirements were particularly high for land preparation and crop maintenance. Looking across crops, land preparation and crop maintenance took the largest share of labor for cassava, yam, and maize. Rice, on the other hand, required large shares of labor for land preparation and harvesting. When all the systems are considered together, however, crop maintenance required more labor than land preparation. In response to apparent unavailability and cost of labor, farmers are increasingly demanding mechanical traction for land preparation in Ghana. The benefits of mechanizing land preparation depend on both the system and the type of crop cultivated. Mechanization of land preparation for cassava in the vegetable belt, for instance, is more labor saving and cost effective than m Mechanization of land preparation for cassava in cereals belt. Within systems, there is also variation across crops. Where mechanization is not feasible for land preparation or not yet adopted for other field operations such as weeding, an alternative and common substitution for labor in crop production is herbicides. Herbicides are used to clear land for planting as well as to control weeds in standing crops. We found that where herbicide was used, its application reduced labor requirements for land preparation significantly. Selective herbicides were used to control weeds in all the crops examined and in all the belts except the vegetable belt. They also reduced labor use for weeding drastically.
    Keywords: Cropping systems, labor requirements, mechanization, seasonal labor, Development strategies,
    Date: 2011
  9. By: Chuku, Agbai
    Abstract: This study utilizes standard- and nested-EKC models to investigate the income-environment relation for Nigeria, between 1960 and 2008. The results from the standard-EKC model provides weak evidence of an inverted-U shaped relationship with turning point (T.P) around $280.84, while the nested model presents strong evidence of an N-shaped relationship between income and emissions in Nigeria, with a T.P around $237.23. Tests for structural breaks caused by the 1973 oil price shocks and 1986 Structural Adjustment are not rejected, implying that these factors have not significantly affected the income-environment relationship in Nigeria. Further, results from the rolling interdecadal analysis shows that the observed relationship is stable and insensitive to the sample interval chosen. Overall, our findings imply that economic development is compatible with environmental improvements in Nigeria. However, tighter and concentrated environmental policy regimes will be required to ensure that the relationship is maintained around the first two-strands of the N-shape
    Keywords: Environmental Kuznets curve; development; CO2 emissions; nested-EKC model; Nigeria
    JEL: O20 Q01
    Date: 2011–01–11
  10. By: Rashid, Shahidur
    Abstract: Cereal price variability in Ethiopia has worsened in recent years, and some of the earlier liberalizations are being reversed due to the unacceptable economic and political costs of increased price variability. The challenge now is to achieve price stability in a cost-effective way. This paper examines intercommodity price relationships to assess the relative importance of each of the three major cereals in generating price volatility. Based on the estimates from a dynamic econometric model, the paper concludes that maize is the most significant in exacerbating price variability with respect to the persistence of shocks to itself and the two other cereals. This implies that focusing on maize, instead of wheat, will not only help better stabilize prices but also reduce costs of stabilization. The results are also discussed in the context of ongoing policy discussions.
    Keywords: Cointegration, common trend, food price stabilization,
    Date: 2011
  11. By: Oparinde, Adewale; Birol, Ekin
    Abstract: In this paper we attempt to bridge the resilience school of thought and incentive compatibility in livestock disease control policies through a pilot choice experiment study conducted on 104 farm households in the Nasarawa state of Nigeria. The aim of this study was to shed light on farm households' valuation of various compensation plan attributes and trade-offs among these attributes. In the experiment presented here, compensation plan was defined broadly to include not just the traditional attributes, such as the number of days it takes to receive the payment, the compensation rate, and the method of payment, but also more diverse interventions, such as training in biosecurity measures and access to bank loans, which are expected to have longer-term impacts on households' livelihood outcomes. We analyzed the data using various discrete choice models, the best-fitting of which was the random parameter (or mixed) logit model with interactions, which enabled us to capture both unobserved and observed heterogeneity in farm households' preferences for the compensation plan attributes. The results reveal that overall, study households preferred compensation plans that made payment in fewer days, provided facilitated credit access, and offered biosecurity training. Households with better-educated heads and those with lower income levels valued compensation plans that provided credit access and biosecurity training the most. These findings are expected to inform the design of efficient, effective, equitable, and targeted compensation policies, which could not only reduce the livestock disease risk but also improve the resilience of poor farm households' livelihoods against future poultry-related or other idiosyncratic shocks.
    Keywords: avian flu, choice experiment method, compensation scheme, conditional logit model, livestock disease, random parameter logit model,
    Date: 2011
  12. By: Mikkel Barslund; ;
    Abstract: We address the issue of endogenous expenditures in the context of a censored demand system by an augmented regression approach estimated with a two-step estimator. An application to food demand by urban households in Mozambique shows that accounting for endogeneity is potentially important in obtaining reliable point estimates of price and, in particular, expenditure elasticities. Furthermore, a bootstrap approach to obtain confidence intervals when data are clustered - as is the case with most household surveys - is devised. Based on a Monte Carlo exercise we speculate that previous studies in failing to account for the clustered nature of the data overstate the precision with which elasticities are estimated.
    Keywords: Censored demand system, endogeneity, survey data, elasticities, Mozambique, food demand
    JEL: D12 O12
    Date: 2011

This nep-afr issue is ©2011 by Quentin Wodon. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.