nep-afr New Economics Papers
on Africa
Issue of 2011‒05‒14
seventeen papers chosen by
Quentin Wodon
World Bank

  1. Spillover and Competition Effects: Evidence from the sub-Saharan African Banking Sector By Birte Pohl
  2. Fiscal sustainability and the fiscal reaction function for South Africa By Philippe Burger; Ian Stuart; Charl Jooste; Alfredo Cuevas
  3. Why a diversified portfolio should include African assets By Alagidede, Paul; Panagiotidis, Theodore; Zhang, Xu
  4. Student loans: Liquidity constraint and higher education in South Africa By Marc Gurgand; Adrien Lorenceau; Thomas Mélonio
  5. A State is Born: Transport Infrastructure and Democracy in Somaliland By Azam, Jean-Paul
  6. ICT, Financial Inclusion, and Growth Evidence from African Countries By Kangni Kpodar; Mihasonirina Andrianaivo
  7. Feeling The Elephant’s Weight: The Impact of Côte d’Ivoire’s Crisis on WAEMU Trade By Ankouvi Nayo; Philippe Egoumé-Bossogo
  8. Economic Growth and the HIV/AIDS Pandemic: Evidence from the Early 21st Century Copper Boom By Nicholas Wilson
  9. Sustainable Agricultural Practices and Agricultural Productivity in Ethiopia: Does Agroecology Matter? By Kassie, Menale; Zikhali, Precious; Pender, John; Köhlin, Gunnar
  11. Why It Worked: Critical Success Factors of a Financial Reform Project in Africa By Peterson, Stephen
  12. Financial development and survival of African agri-food exports By Jaud, Melise; Kukenova, Madina
  13. Seasonal bias in household vulnerability to poverty stimates: insights from a natural experiment By Chiwaula, Levison; Waibel, Hermann
  14. On the Move Livelihood Strategies in Northern Ghana By Francesca MARCHETTA
  15. Economic and Distributional Impacts of Biofuels in Mali By Dorothée Boccanfuso; Massa Coulibaly; Govinda R. Timilsina; Luc Savard
  16. Oil Spill(over)s: Linkages in Petroleum Product Pricing Policies in West African Countries By Marshall Mills; Mohamed El Harrak; Antonio David; Lorraine Ocampos
  17. Education and Migration Choices in Hierarchical Societies: The Case of Matam, Senegal By Auriol, Emmanuelle; Demonsant, Jean-Luc

  1. By: Birte Pohl
    Abstract: This paper examines the efficiency effects of foreign bank entry on domestic banks in sub- Saharan Africa during the period 1999–2006. Using a recently compiled dataset on foreign bank presence, the competition and spillover effects of North–South, regional and nonregional South–South banks are distinguished. The results show that the competitive pressure on domestic banks' net interest margins emanates only from regional South–South banks. There is evidence of spillover effects from North-South and regional South-South banks on domestic banks. As domestic banks invest in foreign technologies, their overhead costs increase in the short-run. Non-regional South-South banks seem to have little effect on the efficiency of domestic banks.
    Keywords: sub-Saharan Africa, efficiency, South–South banks, spillover
    Date: 2011–04
  2. By: Philippe Burger; Ian Stuart; Charl Jooste; Alfredo Cuevas
    Abstract: How does the South African government react to changes in its debt position? In investigating the question, this paper estimates fiscal reaction functions using various methods (OLS, VAR, TAR, GMM, State-Space modelling and VECM). The paper finds that since 1946 the South African government has ran a sustainable fiscal policy, by reducing the primary deficit or increasing the surplus in response to rising debt. Looking ahead, the paper considers the use of fiscal reaction functions to forecast the debt/GDP ratio and gauging the likelihood of achieving policy goals with the aid of probabilistic simulations and fan charts.
    Keywords: Economic growth , Economic models , Fiscal policy , Fiscal sustainability , Public debt , South Africa ,
    Date: 2011–03–29
  3. By: Alagidede, Paul; Panagiotidis, Theodore; Zhang, Xu
    Abstract: We employ parametric and non-parametric cointegration to investigate the extent of integration between African stock markets and the rest of the world. Long-run correlation estimates imply very low association between the two. The two distinct cointegration approaches confirm the latter through recursive estimation. The implication is that global market movements may have little impact on Africa. However, we argue that including African assets in a mean variance portfolio could be beneficial to international investors.
    Keywords: African Stock Markets; Non-parametric cointegration; Cointegration; Long-run correlation; Correlation
    Date: 2010–11
  4. By: Marc Gurgand (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, J-PAL Europe - J-PAL Europe, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA); Adrien Lorenceau (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Thomas Mélonio (AFD - Agence Française de Développement - Agence Française de Développement)
    Abstract: Empirical evidence that access to higher education is constrained by credit availability is limited and usually indirect. This paper provides direct evidence by comparing university enrollment rates of South African potential students, depending on whether they get a loan or not to cover their registration fees, in a context where such fees are high. We use matched individual data from both a credit institution (Eduloan) and the Department of Education. Based on a regression discontinuity design using the fact that loans are granted according to a credit score threshold, we can estimate the causal impact of loan obtainment. We find that the credit constraint is substantial, as it decreases the enrollment rate into higher education by more than 20 percentage points in a population of student loan applicants.
    Keywords: Education ; university ; credit constraint ; regression discontinuity
    Date: 2011–05
  5. By: Azam, Jean-Paul
    Abstract: Somaliland has recently developed an unexpected democracy after seceding from chaos-ridden Somalia, while turning its port of Berbera into a success story, competing successfully with the long established ones in the Horn of Africa. A simple game-theoretic model is used to explain why the home-grown democratic institutions that developed in Somaliland are a key factor in making Berbera a credible outlet for the external trade of neighboring landlocked Ethiopia. The model shows that redistributing some of the resources from this trade is a key condition for sustaining this efficient political equilibrium.
    Date: 2010–09
  6. By: Kangni Kpodar; Mihasonirina Andrianaivo
    Abstract: This paper studies the impact of information and communication technologies (ICT), especially mobile phone rollout, on economic growth in a sample of African countries from 1988 to 2007. Further, we investigate whether financial inclusion is one of the channels through which mobile phone development influences economic growth. In estimating the impact of ICT on economic growth, we use a wide range of ICT indicators, including mobile and fixed telephone penetration rates and the cost of local calls. We address any endogeneity issues by using the System Generalized Method of Moment (GMM) estimator. Financial inclusion is captured by variables measuring access to financial services, such as the number of deposits or loans per head, compiled by Beck, Demirguc-Kunt, and Martinez Peria (2007) and the Consultative Group to Assist the Poor (CGAP, 2009). The results confirm that ICT, including mobile phone development, contribute significantly to economic growth in African countries. Part of the positive effect of mobile phone penetration on growth comes from greater financial inclusion. At the same time, the development of mobile phones consolidates the impact of financial inclusion on economic growth, especially in countries where mobile financial services take hold.
    Keywords: Africa , Cross country analysis , Developing countries , Economic growth , Information technology , Telephone systems ,
    Date: 2011–04–04
  7. By: Ankouvi Nayo; Philippe Egoumé-Bossogo
    Abstract: This paper analyzes the impact of political instability in Côte d’Ivoire on WAEMU trade over 1990-2007, applying panel econometric techniques to a gravity model of trade within WAEMU and between WAEMU and the rest of the world. The paper finds that intra-regional trade represents a small share of total WAEMU trade and that Côte d’Ivoire accounts for around half of that total, highlighting the importance of this country for the region. The political instability in Côte d’Ivoire has led to an increase in transaction costs, making it relatively more costly for member countries to trade with each other than with the rest of world. Instability has also resulted in a diversion of trade away from Côte d’Ivoire in favor of other countries equipped with ports and in a reduction of WAEMU overall potential trade. For Côte d’Ivoire alone, lost trade is estimated at around 40 percent of its potential trade with the WAEMU in the absence of instability. With a normalization in Côte d’Ivoire, enhanced security and further integration would be essential to achieve higher levels of trade and growth in the WAEMU region.
    Keywords: Bilateral trade , Côte d'Ivoire , Cross country analysis , Exports , Imports , International trade , Political economy , Trade integration , Trade liberalization , Trade models , West Africa , West African Economic and Monetary Union ,
    Date: 2011–04–07
  8. By: Nicholas Wilson (Williams College)
    Abstract: Copper mining is among the largest economic activities in Zambia, comprising close to ten percent of GDP. Between 2003 and 2008, the price of copper increased by over 400 percent. In response, copper production in Zambia grew by 70 percent and employment in copper mining increased by nearly 200 percent. This paper examines the effect of this large and sustained economic shock on sexual behavior and the spread of HIV/AIDS in Zambia. I use nationally representative survey data on sexual behavior before and during the copper boom in conjunction with detailed spatial data on the location of survey respondents and copper mines. The results indicate that the copper boom substantially reduced rates of transactional sex and multiple partnerships in the copper mining cities. These effects were partly concentrated among young adults and copper boom induced in-migration to mining areas appears to have contributed to these reductions.
    Keywords: commodity shocks, copper mining, economic growth, HIV/AIDS, Zambia
    JEL: I18 J10 O12 O40
    Date: 2010–07
  9. By: Kassie, Menale; Zikhali, Precious; Pender, John; Köhlin, Gunnar
    Abstract: This paper uses data from household- and plot-level surveys conducted in the highlands of the Tigray and Amhara regions of Ethiopia to examine the contribution of sustainable land-management practices to net values of agricultural production in areas with low- and high-agricultural potential. A combination of parametric and nonparametric estimation techniques is used to check result robustness. Both techniques consistently predict that minimum tillage is superior to commercial fertilizers—as are farmers’ traditional practices without use of commercial fertilizers—in enhancing crop productivity in the low-agricultural potential areas. In the high-agricultural potential areas, by contrast, use of commercial fertilizers is superior to both minimum tillage and farmers’ traditional practices without commercial fertilizers. The results are found to be insensitive to hidden bias. Our findings imply a need for careful agroecological targeting when developing, promoting, and scaling up sustainable land-management practices.
    Keywords: agricultural productivity, commercial fertilizer, Ethiopia, low and high agricultural potential, minimum tillage, propensity score matching, switching regression
    JEL: C21 Q12 Q15 Q16 Q24
    Date: 2011–05–05
  10. By: Abebe Damte (Department of Economics, University of Pretoria); Steven F. Koch (Department of Economics, University of Pretoria)
    Abstract: This study examines the role of local level institutions and property right regimes on the forest-poverty link, with respect to non-wood forest products, using data from a random sample of rural households in Ethiopia. Households in the sample derive approximately 8.7% of their income from these products. The determinants of forest dependency were examined separately for different types of forest property right regimes. The findings suggest that forestry management devolution enhances resource use by the poor, while reducing dependency among the rich. Our estimation results, which are consistent across the different measures of forest dependency, also suggest that local level institutions are not significant factors in determining the use of non-wood forest products, a result that differs from the analysis of timber and other woody materials. From the study results, we conclude that generalizations of the forest-poverty link are not possible, as the link depends on the type of forest management and the specific characteristics that prevail in the area.
    Keywords: Property rights, forest dependency, local institutions, Ethiopia
    JEL: Q12 Q23 Q28 Q56 R14
    Date: 2011–05
  11. By: Peterson, Stephen (Harvard University)
    Abstract: Little is written about the critical success factors that make or break a project implementing a public financial management reform in Africa. Based on the twelve year experience of Harvard's DSA project which transformed Ethiopia's financial management in the third best on the continent, this paper presents the key factors of the projects success: task, context, patrons, roles, staff and decisions. The task was focused from the start on the basics of financial control (budget and accounts and their budget classification, chart of accounts and financial calendar) and the development of an often forgotten end state in PFM reform--the self-accounting unit. Three features of context supported the project: political (close ties between the US and Ethiopia government established during the civil war), task environment (a hard budget constraint) and, serendipity (a war that ensure one set of cooks in the kitchen and removed the inevitable critique by foreign aid agencies, and the government policy of second stage devolution--which made the focal point of district level decentralization). The third CSF, the projects patrons, stayed the course, met stated commitments and did not meddle. The project performed four roles (go-between in the vacuum of decentralization), decider (making the key decisions on pilots), first responder (providing PFM innovations not specified in the terms of reference) and perhaps most important, the furniture (an object that could be kicked and blamed). The project was able to assemble the array of essential staff: all rounders, managers, technicians, networkers and a closer.
    Date: 2011–03
  12. By: Jaud, Melise; Kukenova, Madina
    Abstract: This paper investigates the link between export survival of agri-food products and financial development. It tests the hypothesis that financial development differentially affects the survival of exports across products based on their need of external finance. The authors test whether exports of products that are relatively more reliant on external capital survive longer when initiated in more financially developed countries. The results suggest that agri-food products that require more external finance indeed sustain longer in foreign markets if the exporting country is more financially developed.
    Keywords: Food&Beverage Industry,Economic Theory&Research,Markets and Market Access,Labor Policies,Debt Markets
    Date: 2011–05–01
  13. By: Chiwaula, Levison; Waibel, Hermann
    Abstract: Using data from 260 households from the Hadejia-Nguru wetlands, the paper shows that vulnerability to poverty estimates are biased if the data used is seasonal. The seasonal bias in the consumption expenditure is less pronounced than in its variance. The paper further shows that the relative sizes of the seasonal bias in expected consumption expenditure and its variance determines the final magnitude of the bias. However, the bias in the expected consumption expenditure is sufficiently corrected by including seasonal dummy variables. We therefore encourage researchers to consider seasonality when they are modelling consumption expenditure with the aim of estimating vulnerability.
    Keywords: Seasonal bias; vulnerability to poverty; natural experiment; Nigeria
    JEL: C13 C42 I32
    Date: 2011–04–29
  14. By: Francesca MARCHETTA
    Abstract: The households who live in the rural areas of Northern Ghana base their subsistence on natural resources, which are threatened by the progressive desertification and increased frequency of extreme weather events in the region. We draw on a field work and on extensive secondary data sources to analyze how the rural population successfully adapted its livelihood strategies to cope with the economic, institutional and environmental changes which occurred over the last two decades. The field work evidences significant differences across communities in the adaptation strategies, which depend closely on the available portfolio of assets. The analysis evidences serious concerns about the environmental consequences of some of the observed changes in livelihood strategies, strengthening the case for public policies aimed at promoting a sustainable development in the region.
    Keywords: Livelihood Strategies, agriculture, Non Farm Activities, Internal migration, sustainable development, Rural Areas
    JEL: Q15 O55 O18 I31
    Date: 2011
  15. By: Dorothée Boccanfuso (Département d’économique and GRÉDI, Université de Sherbrooke); Massa Coulibaly (GREAT -- Groupe de recherche en économie appliquée et théorique); Govinda R. Timilsina (The World Bank); Luc Savard (Département d’économique and GRÉDI, Université de Sherbrooke)
    Abstract: A biofuels race has been observed around the world with rising cost of oil and the increasing concerns over climate change. Unfortunately, this growth is associated with rising food prices, which is a major concern in developing countries like Mali. The development of biofuels in Mali should contribute to reducing dependency on imported fossil fuels and avoiding competing for land used for food production. This study carries out an economic and distributional impact analysis with a microsimulation and CGE model of the prospects of large-scale expansion jatropha to produce biofuels in Mali. We also investigate the impacts of promoting biofuels through a tax-subsidy scheme. Our results reveal that macro effects are slightly negative or weakly positive but generate reductions in poverty at the national level and for rural households. The pro-poor analysis does not reveal a clear trend with proportional, progressive and regressive outcomes.
    Keywords: Biofuels, agriculture, computable general equilibrium model, micro-simulation, distributional analysis.
    JEL: D58 D31 I32 Q17
    Date: 2011–05
  16. By: Marshall Mills; Mohamed El Harrak; Antonio David; Lorraine Ocampos
    Abstract: This paper addresses a number of issues regarding petroleum product pricing in Western Africaemphasizing international spillovers. We use panel unit root rests and long-run modeling based on vector error correction models to assess links and convergence in petroleum product prices across countries. Our results indicate that in general over the long-run there is convergence in prices across the countries. The estimation results for gasoline and diesel prices suggest the presence of long-run links between retail prices among the different country groupings with long-run multipliers ranging from 11 to -6.66. The speed of Adjustment to equilibrium varies significantly according to the countrygroupings considered. In contrast, the econometric results for kerosene prices not only indicate a weaker link between prices across countries, but also a much slower adjustment to equilibrium. Inlight of these important spillovers, the need to better coordinate pricing s and tax policies towards petroleum products at the regional level becomes apparent.
    Date: 2011–05–03
  17. By: Auriol, Emmanuelle (TSE, ARQADE and IDEI); Demonsant, Jean-Luc (Universidad Autonoma de Nuevo Leon)
    Abstract: The paper aims at studying determinants of schooling in traditional hierarchical societies confronted with an established history of outmigration. In the village, a ruling caste controls local political and religious institutions. For children who do not belong to the ruling caste, migration is a social mobility factor that is enhanced by formal schooling. Since formally educated children tend not to return, the ruling caste seeks to develop family loyalty by choosing religious education instead. The theory hence predicts that the social status of the family has a signicant impact on educational choice. Children from the ruling caste who are sent abroad have a lower probability of being sent to formal school. They are more likely to be sent to Koranic schools that emphasize religious and family values. The theoretical predictions are tested on data from Matam region in Senegal, a region where roughly one of every two children have ever attended school.
    Keywords: Schooling, Migration, Social Status, Haalpulaar
    JEL: I21 O12 O15 O17 Z13
    Date: 2011–03–28

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