nep-afr New Economics Papers
on Africa
Issue of 2012‒01‒03
eighteen papers chosen by
Quentin Wodon
World Bank

  1. East African Community: Pre-conditions for an Effective Monetary Union By Durevall, Dick
  2. What Drives Individual Attitude towards Immigration in South Africa? By Giovanni Facchini; Anna Maria Mayda; Mariapia Mendola
  3. Exploring the potential of non-timber forest products: the case of Ethiopian honey export to Denmark By Aravindakshan, Sreejith; Janka Negawo, Worku; Humayun Kabir, Mir; Galib, Md. Waliul
  4. Credit Constraints and Productive Entrepreneurship in Africa By Baliamoune-Lutz, Mina; Brixiova, Zuzana; Ndikumana, Leonce
  5. Xenophobic Attacks, Migration Intentions and Networks: Evidence from the South of Africa By Guido Friebel; Juan Miguel Gallego; Mariapia Mendola
  6. Credit-constrained in risky activities? The determinants of capital stocks of micro and small firms in Western Africa By Michael Grimm; Simon Lange; Jann Lay
  7. War and Stature: Growing Up During the Nigerian Civil War By Akresh, Richard; Bhalotra, Sonia R.; Leone, Marinella; Osili, Una Okonkwo
  8. Agent-based computational economics and African modeling:perspectives and challenges By Nwaobi, Godwin
  9. Law, democracy and the quality of government in Africa By Simplice A, Asongu
  10. Finance and democracy in Africa By Simplice A, Asongu
  11. Measuring Household Vulnerability in the Context of Poverty Education: Evidence from Uganda By Diego Angemi
  12. Impacts of Rural Electrification in Rwanda By Bensch, Gunther; Kluve, Jochen; Peters, Jörg
  13. A Market for Environmentally Responsible Investment? Identifying Obstacles and Enablers of Commodification of Environmental Risks in the South African Investment Industry By Giamporcaro, Stephanie
  14. L'éducation des femmes et le développement en Afrique subsaharienne By Caroline Fink
  15. Reactions of stock market to monetary policy shocks during the global financial crisis: the Nigerian case By Aliyu, Shehu Usman Rano
  16. A Comprehensive Decision Approach for Rubber Tree Planting Management in Africa By Fabrice Valognes; Hélène Ferrer; Moussa Diaby; André Clément-Demange
  17. Integrating Quantitative and Qualitative Data to Improve our Understanding of Poverty in Uganda By Diego Angemi

  1. By: Durevall, Dick (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Kenya, Tanzania and Uganda signed the Treaty for the establishment of the East African Community (EAC) in 1999, which entered into force in July 2000. In 2007 it was signed by Burundi and Rwanda. According to the Treaty, EAC should first form a customs union, then a common market and a monetary union, and finally a political union. The Customs Union was formally completed in 2010, and Common Market Protocol was signed in 2009. Currently the intention is to sign the East African Monetary Union protocol 2012, while the date for actual implementation of the common currency is uncertain. The purpose of this note is to discuss preconditions for an effective monetary union among the EAC members, with a focus on Rwanda. It first outlines potential economic benefits and costs of a monetary union, and then discusses political and institutional preconditions. It concludes that although there are potentially substantive economic net-benefits, a monetary union is a risky project for political reasons. The political will among policymakers is key to successful implementation, and it could vanish with a change of government or because of discontent among influential lobby groups. However, the process towards forming are monetary union is appears to be highly beneficial the EAC members, both directly by improving monetary policy and indirectly by contributing to economic integration.<p>
    Keywords: Africa; Burundi; common currency; EAC; Kenya; monetary union; regional integration; Rwanda; Tanzania; Uganda
    JEL: F15
    Date: 2011–12–20
  2. By: Giovanni Facchini (Erasmus University, University of Milan, Centro Studi Luca d’Agliano, CEPR and CES-Ifo); Anna Maria Mayda (Georgetown University, Centro Studi Luca d’Agliano, CEPR and IZA); Mariapia Mendola (University of Milan Bicocca and Centro Studi Luca d’Agliano)
    Abstract: This paper empirically investigates the determinants of individual attitudes towards immigration in South Africa using the 1996, 2001 and 2007 rounds of the World Value Survey. The main question we want to answer is whether South African public opinion on migration is affected by the potential labor market competition of migrants towards natives. We investigate this issue by estimating the impact of survey respondents’ individual skill on their pro-migration attitudes. Our estimates show that the impact of individual skill – measured both with educational attainment and an occupationbased measure – is positive and significant in both 1996 and 2001. Given that in both years immigrants to South Africa are on average more skilled than natives, we conclude that the labor-market channel does not play a role in preference formation over immigration. What might explain the positive impact of individual skill are noneconomic determinants.
    Keywords: Immigration Attitudes; South Africa
    JEL: F22 J61
    Date: 2011–12–27
  3. By: Aravindakshan, Sreejith; Janka Negawo, Worku; Humayun Kabir, Mir; Galib, Md. Waliul
    Abstract: Its diverse agroecology has endowed Ethiopia with enormous honey production potential in Africa. Nevertheless, due to the undeveloped production system and poor market linkage with the global arena, the country could not fetch proportional benefits from this resource. To enhance better understanding on the problem and recommend appropriate improvement measures for the sector, prevailing opportunities and constraints were explored in relation to honey export to Denmark. Major honey stakeholders were contacted to assess the opportunities and constraints of Ethiopian honey export. Semi-structured interview, participatory appraisal technique and short questionnaire interview were adopted for data collection. The results show improving opportunities for exporting companies through creating conducive policy and support from the government of Ethiopia and NGOs. On the other hand, current supply of honey by producers in terms of quantity and quality are major constraints for the exporters. In relation to importer, there are growing demands for Ethiopian honey due to its organic source. Similarly, consumers. survey showed that the demand for organic honey has the highest priority in contrast to origin and price. However, most consumers lack information and have concern over Ethiopian honey; especially in terms of quality and characteristics. Development strategy that improves smallholder honey production capacity, better business communication with potential Danish honey importers and promotion of organic honey to consumers may make a significant contribution to enhance Ethiopian honey export to Denmark.
    Keywords: Non-timber Forest Products; Ethiopia; honey; export; markets; Denmark
    JEL: N57 Q23 N50 F14 D40
    Date: 2011–10
  4. By: Baliamoune-Lutz, Mina (University of North Florida); Brixiova, Zuzana (United Nations Development Programme (UNDP), Swaziland); Ndikumana, Leonce (University of Massachusetts Amherst)
    Abstract: Limited access of entrepreneurs to credit constrains the creation and growth of private firms. In Africa, access to credit is particularly limited for small and medium enterprises (SMEs) due to unclear property rights and the lack of assets that can be used as collateral. This paper presents a model where firm creation and growth hinge on matching potential entrepreneurs with productive technologies, while firm growth depends on acquired capital. The shortage of collateral creates a binding credit constraint on borrowing by SMEs and hence private sector growth and employment, even though the banking sectors have ample liquidity, as is the case in many African countries. The model is tested using a sample of 20 African countries over the period 2005-09. The empirical results suggest that policies aimed at easing the binding credit constraints (e.g., the depth of credit information and the strength of legal rights pertaining to collateral and bankruptcy) would stimulate productive entrepreneurship and private sector employment in Africa.
    Keywords: credit constraints, productive entrepreneurship, employment, policies
    JEL: G21 L26 D24
    Date: 2011–12
  5. By: Guido Friebel (Goethe University Frankfurt, IZA and CEPR); Juan Miguel Gallego (Universidad del Rosario and Centro Studi Luca d\'Agliano); Mariapia Mendola (University of Milan Bicocca and Centro Studi Luca d’Agliano)
    Abstract: We investigate how emigration flows from a developing region are affected by xenophobic violence at destination. Our empirical analysis is based on a unique survey among more than 1000 households collected in Mozambique in summer 2008, a few months after a series of xenophobic attacks in South Africa killed dozens and displaced thousands of immigrants from neighbouring countries. We estimate migration intentions of Mozambicans before and after the attacks, controlling for the characteristics of households and previous migration behaviour. Using a placebo period, we show that other things equal, the migration intention of household heads decreases from 37 to 33 percent. The sensitivity of migration intentions to violence is larger for household heads with many children younger than 15 years, decreasing the migration intention by 11 percentage points. Most important-ly, the sensitivity of migration intentions is highest for those household heads with many young children whose families have no access to social networks. For these household heads, the intention falls by 15 percentage points. Social networks provide insurance against the consequences young children suffer in case the household head would be harmed by xenophobic violence and conse-quently could not provide for the family.
    Keywords: violence, risk, migration, household behaviour, Mozambique
    JEL: O1 R2 J6 D1
    Date: 2011–10–17
  6. By: Michael Grimm (International Institute of Social Studies, The Hague); Simon Lange (Georg-August-University Göttingen); Jann Lay (GIGA German Institute of Global and Area Studies, Hamburg)
    Abstract: Micro and small enterprises (MSEs) in developing countries are typically considered to be severely credit constrained. Additionally, high business risks may partly explain why capital stocks of MSEs remain low. This article analyzes the determinants of capital stocks of MSEs in poor economies focusing on credit constraints and risk. The analysis is based on a unique, albeit cross-sectional but backward-looking, micro data set on MSEs covering the economic capitals of seven West-African countries. The main result is that capital market imperfections indeed seem to explain an important part of the variation in capital stocks in the early lifetime of MSEs. Furthermore, the analyses show that risk plays a key role for capital accumulation. Risk-averse individuals seem to adjust their initially low capital stocks upwards when enterprises grow older. MSEs in risky activities owned by wealthy individuals even seem to over-invest when they start their business and adjust capital stocks downwards subsequently. As other firms simultaneously suffer from capital shortages, such behaviour may imply large inefficiencies.
    Keywords: Informal sector; micro and small enterprises; credit constraints; risk; risk aversion; firm growth; West-Africa
    JEL: D13 D61 O12
    Date: 2011–12–21
  7. By: Akresh, Richard (University of Illinois at Urbana-Champaign); Bhalotra, Sonia R. (University of Bristol); Leone, Marinella (University of Sussex); Osili, Una Okonkwo (Indiana University-Purdue University Indianapolis)
    Abstract: The Nigerian civil war of 1967-70 was precipitated by secession of the Igbo-dominated south-eastern region to create the state of Biafra. It was the first civil war in Africa, the predecessor of many. We investigate the legacies of this war four decades later. Using variation across ethnicity and cohort, we identify significant long run impacts on human health capital. Individuals exposed to the war at all ages between birth and adolescence exhibit reduced adult stature and these impacts are largest in adolescence. Adult stature is portentous of reduced life expectancy and lower earnings.
    Keywords: war, height, early life, human capital investments, Nigeria
    JEL: I12 O12 J13
    Date: 2011–12
  8. By: Nwaobi, Godwin
    Abstract: In recent years, the government, of African Countries has assumed major responsibilities for economic reforms and growth. In attempting to describe their economies, economists (policymakers) in many African Countries have applied certain models that are by now widely known: Linear programming models, input-output models, macro-econometric models, vector auto regression models and computable general equilibrium models. Unfortunately, economies are complicated systems encompassing micro behaviors, interaction patterns and global regularities. Whether partial or general in scope, studies of economic systems must consider how to handle difficult real-world aspects such as asymmetric information, imperfect competition, strategic interaction, collective learning and multiple equilibria possibility. This paper therefore argues for the adoption of alternative modeling (bottom-up culture-dish) approach known as AGENT-BASED Computational Economics (ACE), which is the computational study of African economies modeled as evolving systems of autonomous interacting agents. However, the software bottleneck (what rules to write for our agents) remains the primary challenge ahead.
    Keywords: artificial intelligence; computational laboratory; complex networks; multi-agent systems; agent-base computational economics; social networks; macro-econometric model; linear programming; input-output; vector auto regression; ace models; var models; neural networks; gene networks; derivatives; financial contagion; Africa economies; aceges models; energy
    JEL: C9 C6 C5 C0 B4 C7 C1 C4 D5 C3 C8 C2
    Date: 2011–12–14
  9. By: Simplice A, Asongu
    Abstract: This paper examines the big questions of African comparative politics. It assesses the interaction of three crucial components in the development of the continent: law, democracy and quality of government. Political regimes of democracy, polity and autocracy are instrumented with income-levels, legal-origins, religious-dominations and press-freedom levels to account for government quality dynamics of corruption-control, government-effectiveness, voice and accountability, political-stability, regulation quality and rule of law. Findings indicate democracy has an edge over autocracy while the later and polity overlap. A democracy that takes into account only the voice of the majority is better in government quality than autocracy, while a democracy that takes into account the voice of the minority (polity) is worse in government quality than autocracy. As a policy implication, democracy once initiated should be accelerated to edge the appeals of authoritarian regimes and reap the benefits of time and level hypotheses.
    Keywords: Law; Politics; Democracy; Government Policy; Development
    JEL: P43 O10 K00 P16 P50
    Date: 2011–12–20
  10. By: Simplice A, Asongu
    Abstract: The motivations of the Arab Spring and hitherto unanswered questions about some of its dynamics inspired this paper, which focuses on how democracy, polity and autocracy affect financial development dynamics of depth, efficiency, activity and size in Africa; contingent on religious-domination, income-levels and colonial-legacies. Findings could be summarized in the following. (1) Authoritarian regimes have a higher propensity to effect policies that favor the development of financial intermediary depth, activity and size. Democracy has important effects on the degree of competition for public offices but less significant effects in comparison with autocracy on policies towards financial development. (2) Christian-dominated countries have higher (lower) levels of financial intermediation efficiency (depth) than-Islam oriented countries. (3) Income-levels also matter in financial development as poor countries have a lower propensity to improve their financial dynamics than wealthy states. (4) On average English common-law countries have better democratic institutions that their French civil-law counterparts. (5) There is evidence of a U-shape relationship between national wealth and the level of democracy, with Low-income countries experiencing lower (higher) levels of democracy than Upper (Lower) middle income countries. As a policy implication, once democracy is initiated, it should be accelerated (to edge the appeals of authoritarian regimes) and reap the benefits of level and time hypotheses in financial development.
    Keywords: Banking; Finance; Politics; Democracy; Development
    JEL: O10 E50 E40 P16 P50
    Date: 2011–12–20
  11. By: Diego Angemi (Centro Studi Luca d\'Agliano)
    Abstract: While it has long been demonstrated (Rosenzweig and Binswanger, 1993; Banerjee and Newman, 1994) that considerations of risk and uncertainty are key to understand the dynamics leading to and perpetuating poverty, it is only recently that policy makers have taken a more active interest in trying to incorporate considerations of risk and vulnerability into their strategies to reduce poverty (Christiaensen and Subbarao, 2001). The aim of this paper is to quantify the severity of vulnerability by generating the first quantitative assessment of vulnerability in Uganda, a country at the forefront of poverty analysis. The findings support the hypothesis that during the past decade, alongside sharp reductions in poverty, vulnerability to poverty in Uganda declined from 57% in 1992/93 to 25% in 1999/00. Such results highlight the importance for policy makers to distinguish between the effective implementation of poverty-prevention and poverty-reduction programmes.
    Keywords: Poverty; Vulnerability; Risk; Consumption Expenditure
    JEL: I32 O12
    Date: 2011–10–17
  12. By: Bensch, Gunther (RWI); Kluve, Jochen (Humboldt University Berlin and RWI); Peters, Jörg (RWI)
    Abstract: Rural electrification is believed to contribute to the achievement of the MDG. In this paper, we investigate electrification impacts on different indicators. We use household data that we collected in Rwanda in villages with and without electricity access. We account for self-selection and regional differences by using households from the electrified villages to estimate the probability to connect for all households – including those in the non-electrified villages. Based on these probabilities we identify counterfactual households and find robust evidence for positive effects on lighting usage. Effects on income and children's home studying become insignificant if regional differences are accounted for.
    Keywords: rural electrification, energy access, impact evaluation, matching, difference-in-difference
    JEL: O12 O13 O18 O22
    Date: 2011–12
  13. By: Giamporcaro, Stephanie
    Abstract: This paper analyzes the views of South African investment organizations on the likelihood of commodification of environmental risks in their investment decision processes. It is based on an empirical qualitative survey of 22 investment organizations, which are signatories to the United Nations’ Principles for Responsible Investment. We describe a range of issues, identified by the investment players interviewed, that are likely to prevent or accelerate the internalization of environmental risks in the South African investment industry. The chance that broader commodification of the South African investment industry will occur—beyond the growing but still small ranks of responsible investors—seems to be linked to realization of an adequate political framing. This means legislating standardized environmental disclosure by corporations and a long-term commitment by institutional investors to responsible investment philosophies. The tension between social developmental goals and environmental goals is seen as a major political obstacle at the national level.
    Keywords: commodification, political framing, calculative framing, conventions, environmental risks, responsible investment
    Date: 2011–01–31
  14. By: Caroline Fink (USTV UFR SEG - Université Sud-Toulon-Var - UFR Sciences économiques et de gestion - Ministère de l'Enseignement Supérieur et de la Recherche Scientifique)
    Abstract: Les hommes et les femmes sont inégaux face au développement, et d'autant plus dans les PED. En Afrique subsaharienne, le développement des femmes à travers l'éducation est indispensable afin de converger, voire de dépasser les OMD.
    Keywords: femmes, Afrique subsaharienne, éducation, développement, OMD, objectifs du millénaire pour le développement, pays en développement
    Date: 2011–06–15
  15. By: Aliyu, Shehu Usman Rano
    Abstract: This paper seeks to assess the reactions of Nigeria’s stock market to monetary policy innovations during the period of global financial crisis on the basis of monthly data over the period January, 2007 to August, 2011. In particular, stock market return was regressed against major monetary policy instruments; money stock (M1, and M2) and monetary policy rate (MPR). The theoretical basis for the paper stems from the works of new classical macroeconomics, rational expectation hypothesis. Lucas (1972) postulates that the unanticipated and not anticipated monetary shock influences real economic activity. Using the GARCH by developed Engle and Bollerslev (1986) and EGARCH by Nelson (1991) methodologies, the paper empirically assessed the impact monetary policy innovations exerts on stock returns in the Nigeria’s Stock Exchange (NSE) market during the period of the crisis. Results from the empirical analysis revealed that the unaticipated component of policy innovations on M2 and MPR exerts distabilizing effect on NSE’s returns, whereas the anticipated component does not. This lends support to the REH argument for the Nigerian stock market. The pqper strongly recommends realistic and timely policy pronouncements by the MPC to achieve stability in the market.
    Keywords: Monetary Policy; GARCH; EGARCH; Rational Expectation Hypothesis
    JEL: E52 E44 G01
    Date: 2011–11–24
  16. By: Fabrice Valognes (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen); Hélène Ferrer (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen); Moussa Diaby (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen); André Clément-Demange (BEPC - Biologie du développement des espèces pérennes cultivées - CIRAD : UMR57 - IRD - INRA : UR1098 - Université Montpellier II - Sciences et Techniques du Languedoc - Montpellier SupAgro)
    Abstract: The main objective of this study is to settle a rigorous field of decision analysis for rubber tree clones selection. Nowadays, there does not exist any process based upon a rigorous method to select the best clone to be plant in order to get the highest return on investment. The only known selection method is to use the experience of different protagonists acting in the plantation. So, we need a tool that takes into account very important criteria in order to achieve the main objective. This goal is achieved by using multicriterion analysis methods to the clone selection. The ranking procedure uses Elimination and Choice Expressing the Reality (ELECTRE III). For each criterion, indifference and preference thresholds are determined after establishing the relative importance of each criterion including rubber tapping, cumulative production during 15 years, cumulative production between 15 and 25 years, wind resistance, disease resistance, physiological resistance, grafting and quality of the rubber.
    Keywords: multicriteria decision making;ELECTRE III;rubber tree;agricultural resource management
    Date: 2011–07–01
  17. By: Diego Angemi (Centro Studi Luca d\'Agliano)
    Abstract: This manuscript aims to deepen our understanding of poverty in Uganda, by integrating the coun-try’s qualitative and quantitative data, enriching information from one approach with that from the other, and merging the findings from these two approaches into one set of policy recommendations. The results show that this dual approach to poverty analysis enriches the discussion of poverty trends by drawing attention to aspects of poverty and well-being neglected by simple construction of poverty indicators.
    Keywords: Quantitative; qualitative; poverty; policy
    JEL: I32 O20
    Date: 2011–10–17
  18. By: Domingues, Patrick (Centre d'Economie de la Sorbonne, University of Paris 1 Panthéon Sorbonne)
    Abstract: Using a new database on the Mozambican Civil War, this paper utilises the heterogeneity of the duration of conflict across the Mozambican provinces to assess its impact on school enrolment. The results indicate that only conflict exposure during the first seven years of life reduced the probability of school enrolment; no effect was found for exposure after this age or for in-utero exposure. Furthermore, the results show that this negative effect is specific to girls and that these results are linked with choices made by households during the war period.
    Keywords: Civil War; Education; Mozambique; Gender.
    JEL: I20 O12 O55
    Date: 2011–12–16

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