nep-afr New Economics Papers
on Africa
Issue of 2011‒08‒09
fifteen papers chosen by
Quentin Wodon
World Bank

  1. Impact of the business environment on output and productivity in Africa By Bah, El-hadj M.; Fang, Lei
  2. The 'Out of Africa' Hypothesis, Human Genetic Diversity, and Comparative Economic Development By Ashraf, Quamrul; Galor, Oded
  3. Who benefits the most from peer effects within ethnic group ? Empirical evidence on the South African Labour Market By Gaëlle Ferrant; Yannick Bourquin
  4. American trade policy towards Sub Saharan Africa –- a meta analysis of AGOA By Cooke, Edgar F A
  5. Improving aid effectiveness in aid-dependent countries : lessons from Zambia By Monica Beuran; Gaël Raballand; Julio Revilla
  6. Lasting welfare effects of widowhood in a poor country By van de Walle, Dominique
  7. Will the SARB always succeed in fighting inflation with contractionary policy? By Guangling (Dave) Liu
  8. When Does Ethnic Diversity Lead to Violence? Evidence from the 2007 Elections in Kenya By Thomas Markussen; Kitavi Mbuvi
  9. Measuring the contribution of extractive industries to local development : the case of oil companies in Nigeria By Abdou Kâ Diongue; Gaël Giraud; Cécile Renouard
  10. Recalibrating Development Co-operation: How Can African Countries Benefit from Emerging Partners? By Myriam Dahman Saidi; Christina Wolf
  11. Idiosyncratic shocks, risk management and welfare dynamics in rural Ghana By Naschold, Felix; Walker, Thomas; Barrett, Christopher B.; Osei, Robert
  12. Money laundry and financial development By Yallwe, Hagos Alem; Buscemi, Antonino
  13. Commitments to save : a field experiment in rural Malawi By Brune, Lasse; Gine, Xavier; Goldberg, Jessica; Yang, Dean
  14. Why Don't the Poor Save More? Evidence from Health Savings Experiments By Pascaline Dupas; Jonathan Robinson
  15. Who is vouching for the input voucher ? decentralized targeting and elite capture in Tanzania By Pan, Lei; Christiaensen, Luc

  1. By: Bah, El-hadj M.; Fang, Lei
    Abstract: We develop a general equilibrium model to assess the quantitative effects of the business environment, including regulation, crime, corruption, infrastructure and access to finance, on output and total factor productivity (TFP) for 30 Sub-Saharan African countries. The first four dimensions create inefficiencies at the firm level and are modeled as a tax on output. From the data, we find that on average firms in Africa lose a fifth of their sales due to those inefficiencies. On the other hand, poor access to credit affects the reallocation of resources across firms, capital formation and production scale. We find that the quantitative effects of these dimensions of the business environment are large, leading to decreases in output and TFP in the range of 40 to 77 percent and 18 to 44 percent respectively. Overall, they explain 67 percent of the variation in income per worker relative to the US.
    Keywords: Business environment, Investment Climate, African Development, Productivity, Credit Constraints
    JEL: O47 L23 O16
    Date: 2011–07–12
  2. By: Ashraf, Quamrul; Galor, Oded
    Abstract: This research argues that deep-rooted factors, determined tens of thousands of years ago, had a significant effect on the course of economic development from the dawn of human civilization to the contemporary era. It advances and empirically establishes the hypothesis that, in the course of the exodus of Homo sapiens out of Africa, variation in migratory distance from the cradle of humankind to various settlements across the globe affected genetic diversity and has had a long-lasting effect on the pattern of comparative economic development that is not captured by geographical, institutional, and cultural factors. In particular, the level of genetic diversity within a society is found to have a hump-shaped effect on development outcomes in both the pre-colonial and the modern era, reflecting the trade-off between the beneficial and the detrimental effects of diversity on productivity. While the intermediate level of genetic diversity prevalent among Asian and European populations has been conducive for development, the high degree of diversity among African populations and the low degree of diversity among Native American populations have been a detrimental force in the development of these regions.
    Keywords: Comparative development; Human genetic diversity; Income per capita; Land productivity; Neolithic Revolution; Population density; The 'Out of Africa' hypothesis
    JEL: N10 N30 N50 O10 O50 Z10
    Date: 2011–08
  3. By: Gaëlle Ferrant (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Yannick Bourquin (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: This paper provides evidence that local social interactions within etnic groups may explain the puzzling variations in labour-market outcomes across individuals. Peer effects work first by creating pressure on labor-market participation, second, by conveying information about job opportunities and by raising wages. These effects differ through a selection effect : gender and ethnic groups who are less integrated in the labour market benefit more from peer effect. Finally, networks exhibit decreasing returns. The problems of endogeneity and simultaneity of local peer effects are addressed by using (i) data aggregated at the province level, (ii) the distribution of the sex of the peers' siblings as an instrumental variable and (iii) a quasi-panel data approach relying on the Hausman-Taylor estimator. The importance of social interactions in the labour market suggests that a social multiplier exists and our estimates show that any labour-market shock is magnified with an elasticity of 0.5.
    Keywords: Peer effects, development economics, labour, South Africa.
    Date: 2011–07
  4. By: Cooke, Edgar F A
    Abstract: Twelve econometric studies investigating the impact of agoa presented in this paper have reported 174 different estimates. In testing for publication bias and whether there is a genuine empirical impact of agoa we resort to a meta-analysis. The meta-analysis provides us with a formal means of testing for publication bias and an empirical effect. The result shows significant publication bias in the selected studies. However, in a few cases the test for a genuine effect is passed successfully. The results of the meta-analysis indicates that agoa increased the trade of beneficiaries by 13.2%.
    Keywords: Trade preference regimes; African Growth and Opportunity Act (AGOA); Publication bias; Meta-Regression Analysis; Funnel plot; Study effect
    JEL: C10 F13 F10
    Date: 2011–07–30
  5. By: Monica Beuran (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, World Bank Country Office in Zambia - LUNWB); Gaël Raballand (World Bank Country Office in Zambia - LUNWB); Julio Revilla (World Bank Country Office in Zambia - LUNWB)
    Abstract: Zambia was a middle-income country when it achieved independence from Great Britain in 1964. After decades of international aid Zambia has become a low-income country, and its per capita GDP is only now returning to the levels it had reached over forty years ago. While aid is far from the only variable at work in Zambia's development, its impact has been questionable. This paper examines the issue of aid effectiveness in Zambia, especially in terms of how the incentive structure faced by donors may lead to decreased accountability and inadequate concern for long-term outcomes, rendering aid less beneficial. The paper concludes by proposing a revised approach to the provision and use of international aid in Zambia, as well as in other aid-dependent countries in Sub-Saharan Africa.
    Keywords: Aid effectiveness, Zambia, donors, projects, aid incentives.
    Date: 2011–07
  6. By: van de Walle, Dominique
    Abstract: Little is known about the situation facing widows and their dependent children in West Africa especially after the widow remarries. Women in Malian society are vulnerable to the loss of husbands especially in rural areas. Households headed by widows have significantly lower living standards on average than male or other female headed households in both rural and urban areas; this holds both unconditionally and conditional on observable household and individual characteristics including age. Furthermore, the adverse welfare effects of widowhood appear to persist even after widows are absorbed into male headed households. An examination of individual measures of well-being further reveals that, relative to other women, worse outcomes for ever-widowed women persist through remarriage. These detrimental effects are passed on to children, indicating an intergenerational transmission of poverty stemming from widowhood.
    Keywords: Gender and Law,Population Policies,Gender and Development,Population&Development,Anthropology
    Date: 2011–07–01
  7. By: Guangling (Dave) Liu (Department of Economics)
    Abstract: The conventional view is that a monetary policy shock has both supply-side and demand-side effects, at least in the short run. Barth and Ramey (2001) show that the supply-side effect of a monetary policy shock may be greater than the demand-side effect. We argue that it is crucial for monetary authorities to understand whether an increase in expected future inflation is due to supply shocks or demand shocks before applying contractionary policy to forestall inflation. Using a standard New Keynesian dynamic stochastic general equilibrium model with the cost-channel of monetary transmission, we show that whether the South African Reserve Bank should apply contractionary policy to fight inflation depends critically on the nature of the disturbance. If an increase in expected future inflation is mainly due to supply shocks, the South African Reserve Bank should not apply contractionary policy to fight inflation, as this would lead to a persistent increase in inflation and a greater loss in output.
    Keywords: Monetary policy, price puzzle, inflation targeting, New Keynesian model
    JEL: E52 E31 E58 E12
    Date: 2011
  8. By: Thomas Markussen (Department of Economics, University of Copenhagen); Kitavi Mbuvi (Kenya Institute of Education)
    Abstract: Some people have a concern for a fair distribution of incomes while others do not. Does such a concern matter for majority voting on redistribution? Fairness preferences are relevant for redistribution outcomes only if fair-minded voters are pivotal. Pivotality, in turn, depends on the structure of income classes. We experimentally study voting on redistribution between two income classes and show that the effect of inequality aversion is asymmetric. Inequality aversion is more likely to matter if the “rich” are in majority. With a “poor” majority, we find that redistribution outcomes look as if all voters were exclusively motivated by self-interest.
    Keywords: Conflict; ethnicity; poverty; unemployment; public services; Kenya
    JEL: D74 H4 J6 O55
    Date: 2011–07
  9. By: Abdou Kâ Diongue (UFR SAT - Université Gaston Berger de Saint-Louis Sénégal - Université Gaston Berger de Saint-Louis); Gaël Giraud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, ESCP-Europe - Campus de Paris); Cécile Renouard (ESSEC - ESSEC Business School)
    Abstract: Extractive industries face two main challenges in terms of CSR and poverty reduction : 1) recognize that societal activity is part of their core business ; 2) take part in socio-economic projects that contribute to their stakeholders' empowerment and not only to their living conditions. Based on surveys achieved in Nigeria in 2008, the paper presents two societal performance indices meant to be complementary : the Poverty Exit Index (PEI) and the Relational Capability Index (RCI). We show that, while they have fostered the PEI of the local communities, the development projects of the oil companies had a rather negative impact on their RCI. We then identify key variables that can influence positively the RCI and on which a sensible development policy should focus.
    Keywords: Development indices, capability approach, relational capability, development, poverty, impact assessment.
    Date: 2011–07
  10. By: Myriam Dahman Saidi; Christina Wolf
    Abstract: With the recent boost of emerging economies in African economic relations, a different philosophy of development co-operation is progressively gaining momentum. Indeed, there are critical differences in the way development co-operation is provided by traditional and emerging partners. For the latter, aid is only one element of a broader economic engagement toolbox. These new realties on the ground mark a qualitative change in the provision of development co-operation both in terms of sectoral allocation and modalities of delivery, which in turn impacts on outcomes as well as the challenges for the recipient countries. We evaluate concerns often raised in this respect (e.g. the lack of policy conditionality destroying Western efforts to promote better governance) and stress that a new set of challenges emerges for African governments in the light of these different engagement modalities. The challenges for African governments to make the most of the new modes of co-operation could be summarised as follows: i) to define a clear strategy; ii) to ensure maintenance; and iii) to enhance their bargaining position.<BR>L’augmentation des relations économiques entre l’Afrique et les partenaires émergents rend plus claire la différence de concept qui sous-tends la coopération au développement offerte par les partenaires traditionnels et émergeants. Dans la philosophie des partenaires émergents l’aide n’est qu’un élément d’une boite à outils beaucoup plus large. Ces nouvelles réalités de terrains sont la marque d’un réel changement qualitatif dans l’offre de coopération au développement, aussi bien en termes d’allocation sectorielle des ressources que de modalités d’approvisionnement, ce qui a un impact sur les résultats et sur les défis auxquels les pays bénéficiaires auront à faire face. Ce rapport analyse les sujets d’inquiétudes récurrents (comme par exemple l’absence de conditionnalité politique qui pourrait détruire les efforts des partenaires occidentaux pour promouvoir la bonne gouvernance) et souligne l’émergence de nouveaux défis pour les gouvernements africains à la lumière de ces différentes modalités. Afin de tirer tout l’avantage de ces nouveaux modes de coopération les gouvernements africains devront : définir une stratégie explicite, assurer la maintenance et renforcer leur pouvoir de négociation.
    Keywords: development co-operation, emerging partners, coopération pour le développement, partenaires émergeants
    JEL: F21 F3 O16 O19 O55 Q3
    Date: 2011–07
  11. By: Naschold, Felix; Walker, Thomas; Barrett, Christopher B.; Osei, Robert
    Keywords: International Development, Risk and Uncertainty,
    Date: 2011–07
  12. By: Yallwe, Hagos Alem; Buscemi, Antonino
    Abstract: Abstract This study is the novel in analyzing the relationship between money laundry and financial development and also the contribution of financial development in promoting for the occurrence of illegal transactions originated from domestic or foreignmarket. Moreover, the study tried to create link between the theoretical issues of financial development and money laundry with the empirical result using a two period model. The estimation made using the General Moment Method(GMM) for the panel data from 1985 to 2008.We included six countries in our sample: Italy, Switzerland, India, China,Ethiopia and Kenya.We have used the Phillips-Perron(PP) method of testing unit root because of its advantage over the Augmented Dickey Fuller (ADF). To test the number of cointegrating relationships among variables or to determine whether any combinations of the variables are cointegrated,the study employed the Johansen cointegration testing approach. The basic approach uses tax variable in order to determine the illegal currency in circulation. However, in this study we used the level of financial development as a principal factor for increasing or decreasing currency in circulation. Our assumption is, the level of financial development trigger for the demand of money(circulation of money) and consequently promote the occurrence of money laundry. Our regression result exhibited the level of financial development have a significant contribution for increasing demand for money that could be used for legal and illegal transactions. In countries where well(less) financial development exist, the more(less) exposed environmentfor the occurrence of illegal transactions(i.e. money laundry).
    Keywords: money laundry and financial development
    JEL: F3 G3 E3
    Date: 2011–06–08
  13. By: Brune, Lasse; Gine, Xavier; Goldberg, Jessica; Yang, Dean
    Abstract: This paper reports the results of a field experiment that randomly assigned smallholder cash crop farmers formal savings accounts. In collaboration with a microfinance institution in Malawi, the authors tested two primary treatments, offering either: 1)"ordinary"accounts, or 2) both ordinary and"commitment"accounts. Commitment accounts allowed customers to restrict access to their own funds until a future date of their choosing. A control group was not offered any account but was tracked alongside the treatment groups. Only the commitment treatment had statistically significant effects on subsequent outcomes. The effects were positive and large on deposits and withdrawals immediately prior to the next planting season, agricultural input use in that planting, crop sales from the subsequent harvest, and household expenditures in the period after harvest. Across the set of key outcomes, the commitment savings treatment had larger effects than the ordinary savings treatment. Additional evidence suggests that the positive impacts of commitment derive from keeping funds from being shared with one's social network.
    Keywords: Economic Theory&Research,Emerging Markets,Banks&Banking Reform,Debt Markets,Rural Poverty Reduction
    Date: 2011–08–01
  14. By: Pascaline Dupas; Jonathan Robinson
    Abstract: Using data from a field experiment in Kenya, we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health, reduce vulnerability to health shocks, and help people meet their savings goals. The two main barriers that keep people from saving on their own appear to be transfers to others and “unplanned expenditures” on luxury items. Providing people with a designated safe place to keep money was sufficient to overcome these barriers for the majority of individuals, through a mental accounting effect. Adding an earmarking feature reduced savings for the average individual due to the associated liquidity cost and did not help present-biased people save more. For such individuals, stronger incentives to start and continue making deposits are necessary to overcome self-control problems.
    JEL: D14 D91 O16
    Date: 2011–07
  15. By: Pan, Lei; Christiaensen, Luc
    Abstract: Input subsidy programs carry support as instruments to increase agricultural productivity, provided they are market-smart. This requires especially proper targeting to contain the fiscal pressure, with decentralized targeting of input vouchers currently the instrument of choice. Nonetheless, despite clear advantages in administrative costs, the fear of elite capture persists. These fears are borne out in the experience from the 2008 input voucher pilot program in Kilimanjaro, Tanzania, examined here. Elected village officials received about 60 percent of the distributed vouchers, a factor that significantly reduced the targeting performance of the program, especially in more unequal and remote communities. When targeting the poor, greater coverage and a focus on high trust settings helped mitigate these concerns. The findings highlight the continuing need for scrutiny when relying on decentralized targeting. A clearer sense of purpose (increasing productivity among poorer farmers versus increasing aggregate output) could also enhance the targeting performance.
    Keywords: Rural Poverty Reduction,Economic Theory&Research,Housing&Human Habitats,Services&Transfers to Poor,Regional Economic Development
    Date: 2011–05–01

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