nep-afr New Economics Papers
on Africa
Issue of 2012‒05‒08
sixteen papers chosen by
Quentin Wodon
World Bank

  1. The Future of South African Economic History By Johan Fourie; Stefan Schirmer
  2. The Impact of HIV/AIDS on Foreign Direct Investment: Evidence from Sub-Saharan Africa By Elizabeth Asiedu; Yi Jin; Isaac Kalonda-Kanyama
  3. Macroeconomic fluctuations,regime switching(structural breaks) and impulse responses:Nigerian evidence By Nwaobi, Godwin
  4. Credit Constraints & Productive Entrepreneurship in Africa By Mina Baliamoune-Lutz; Zuzana Brixiová; Léonce Ndikumana
  5. Resolving the African Financial Development Gap: Cross-Country Comparisons and a Within-Country Study of Kenya By Franklin Allen; Elena Carletti; Robert Cull; Jun Qian; Lemma Senbet; Patricio Valenzuela
  6. The Probability of Military Rule in Africa, 1970-2007 By Jacopo Costa; Raul Caruso; Roberto Ricciuti
  7. Financing the Start-up and Operation of Immigrant-owned Businesses: the path taken by African Immigrants in the Cape Town Metropolitan Area of South Africa. By Tengeh, Robertson Khan /RKT; Ballard, Harry / HB; Slabbert, Andre /AS
  8. Market Intergration and Border Effects in Eastern Africa By Bruno Versailles
  9. Macroeconomic Surprises and Stock Returns in South Africa By Rangan Gupta; Monique Reid
  10. The Determinants of Earnings Inequalities: Panel data evidence from South Africa By Andrew Kerr; Francis Teal
  11. GDP in the Dutch Cape Colony: The national accounts of a slave-based society By Johan Fourie; Jan Luiten van Zanden
  13. Financial Architecture and the Monetary Transmission Mechanism in Tanzania By Peter Montiel; Christopher Adam; Wilfred Mbowe; Stephen O’Connell
  14. New ways of conceptualizing space and mobility: Lessons from the Sahel to the globalized world By RETAILLE Denis; WALTHER Olivier
  15. Households’ Willingness to Pay for Improved Urban Waste Management in Mekelle City, Ethiopia By Hagos, Dagnew; Mekonnen, Alemu; Gebreegziabher, Zenebe
  16. Empowering Women Through Education: Evidence from Sierra Leone By Naci H. Mocan; Colin Cannonier

  1. By: Johan Fourie (Department of Economics, University of Stellenbosch); Stefan Schirmer (School of Economic and Business Sciences, University of the Witwatersrand)
    Abstract: This note reviews the state and future of South African economic history. We argue that although new techniques, archival sources, international interest and a greater propensity to collaborate within and across disciplines have stimulated new research over the last decade, overcoming our divided methodological and ideological past remains first priority if South African economic history is to make a contribution to future development theory and policy, in South Africa and across the developing world.
    Keywords: South Africa, economic history, historians, Apartheid, colonial history
    JEL: N01
    Date: 2012
  2. By: Elizabeth Asiedu (Department of Economics, The University of Kansas); Yi Jin (Department of Economics, Monash University); Isaac Kalonda-Kanyama (Department of Economics, The University of Kansas)
    Abstract: We employ panel data from 40 countries in sub-Saharan Africa over the period 1990-2008 to examine whether HIV/AIDS has a causal effect on FDI. We find that HIV/AIDS has a negative but diminishing effect on FDI, and this adverse effect occurs even when the HIV prevalent rate is as low as 0.1 percent. The empirical result is then rationalized by a simple theoretical model.
    Keywords: Foreign Direct Investment, HIV/AIDS.
    JEL: F34 F35 I20 O19
    Date: 2012–04
  3. By: Nwaobi, Godwin
    Abstract: While the global economic recovery continues, it remains uneven and subject to downside risks. Yet,to the extent that these linger, they could undermine growth further and foster larger macroeconomic imbalances.In fact,one unwanted characteristics that most Sub-saharan African economies share, is the prevalence and magnitude of output collapses. Unfortunately, research into output collapses remains largely unexplored and much of the focus of growth studies has been on cross-country analysis, ignoring the volatility of growth patherns. This paper therefore intends to show that the hypothesis of a common stochastic productivity trend have a set of econometric implications that allow us to test for its presence,measure its importance and extract estimates of its realized value. Distinctively, we propose to contribute to the current modelling literature by accomodating regime switching and structural break dynamics in a unified framework so as to provide a fuller understanding of the factors underlying the bulk of economic fluctuations in Nigeria.
    Keywords: economicfluctuations;regimeswitching;structural break;var;variancedecomposition;impulseresponses;growth volatility;nigeria;subsaharanafrica; africa;globaleconomy;markovchain;cointegration;ecm;unitroots;tradeterms;outputrate;pricelevels;persistentprofiles;dynamicforcasts
    JEL: F40 C50 E30 E60 E20
    Date: 2011–12–15
  4. By: Mina Baliamoune-Lutz; Zuzana Brixiová; Léonce Ndikumana
    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: 2011–12–01
  5. By: Franklin Allen; Elena Carletti; Robert Cull; Jun Qian; Lemma Senbet; Patricio Valenzuela
    Abstract: With extensive country- and firm-level data sets we first document that the financial sectors of most sub-Saharan African countries remain significantly underdeveloped by the standards of other developing countries. We also find that population density appears to be considerably more important for banking sector development in Africa than elsewhere. To better understand how countries can overcome the high costs of developing viable banking sectors outside large metropolitan areas, we focus on Kenya, which has made significant strides in financial inclusion and development in recent years. We find a positive and significant impact of Equity Bank, a leading private commercial bank on financial access, especially for under-privileged households. Equity Bank’s business model—providing financial services to population segments typically ignored by traditional commercial banks and generating sustainable profits in the process—can be a potential solution to the financial access problem that has hindered the development of inclusive financial sectors in many other African countries.
    JEL: G0 K0 O5
    Date: 2012–04
  6. By: Jacopo Costa (; Raul Caruso (; Roberto Ricciuti (Department of Economics (University of Verona))
    Abstract: In this paper we empirically analyze the socio-economic determinants of the existence of military dictatorships in Africa. A recent literature in political economy analyses the relationship between the civil undemocratic government and the military as an agency problem: the civilian government needs the army to avoid internal violence, but a larger army reduces the opportunity-cost for the military to run a coup d’état and seize power. These papers derive three main causes of military rule: income inequality, ethnic fractionalization, and external threat. We empirically analyze these issues by estimating the probability that a country experiences a military rule. We consider 48 African countries over the period 1970-2007.
    Keywords: dictatorship, Africa
    JEL: D74 P48 Q34
    Date: 2012–05
  7. By: Tengeh, Robertson Khan /RKT; Ballard, Harry / HB; Slabbert, Andre /AS
    Abstract: Drawing a sample of 135 successful African immigrant-owned businesses, this paper sets out to investigate how their owners acquired the necessary capital for start-up and growth thereafter. The paper was designed within the quantitative and qualitative research paradigms, in which a triangulation of three methods was utilised to collect and analyse the data. The paper revealed that although African immigrants are characteristically at the disadvantage when it comes to accessing capital from formal financial institutions, this does not stop them from pursuing entrepreneurial activities. At the start-up stage, they typically resort to personal savings, business credit, family credit, and loans from informal financial institutions. According to the ability to raise capital, we found that a varying range of start-up capital was utilised, which tended to vary across the different ethnic groups studied. Once started, we found that the sources of additional finance available to these immigrants did not change significantly. They conventionally turned to friends, co-ethnics and self-help financial associations to ‘feed’ their need for further funding.
    Keywords: business start-up; immigrant-owned businesses; African immigrants; finance; capital; and South Africa
    JEL: M1 A10 M13
    Date: 2011
  8. By: Bruno Versailles
    Abstract: This paper studies border efects in Eastern Africa by exploiting a consumer price data set covering 4 out of 5 EAC member states, 39 cities and 24 goods over the period 2004-2008. The Law-of-One-Price (LOP) is tested by running level regressions on relative prices with city-pairs the unit of observation. Unsurprisingly, distance plays an important role in explaining relative price movements, both within and between countries. The border efect as measured by the coefficient on a border dummy is significant but smaller compared to what is usually found in the EngelRogers literature. Consequently, distance equivalents, at 300 to 6,000 km, are much lower (and more reasonable) than what most papers working in the Engel-Rogers tradition find. Neither the significance nor the size of the border efect is reduced by allowing for nominal exchange rate variation or non-tarifbarriers. The nominal exchange rate pass through is very high across the region, but lower for country-pairs that include Kenya. The advent of the Customs Union in 2005 improved market integration, as measured by a reduced border efect between 2004 and 2008, but only between Kenya and Uganda. This makes sense as Rwanda and Burundi only joined the EAC in 2007. Further, larger departures from the LOP are found during the Kenyan political crisis as regional markets were disrupted. When splicing the data across goods, staple markets are by far the most integrated with the lowest border efects and the lowest distance coefficients. Non-Trade barriers are most important for fruits and vegetables, which could be linked to these goods being perishable. Non-food items show the largest departures from the LOP, which can be attributed to these goods (i) being less comparable, and (ii) being less present in the consumption baskets of the average Eastern African households (i.e. less deep markets).
    Date: 2012
  9. By: Rangan Gupta (Department of Economics, University of Pretoria); Monique Reid (Department of Economics, University of Stellenbosch)
    Abstract: The objective of this paper is to explore the sensitivity of industry-specific stock returns to monetary policy and macroeconomic news. The paper looks at a range of industry-specific South African stock market indices and evaluates the sensitivity of these indices to a various unanticipated macroeconomic shocks. We begin with an event study, which examines the immediate impact of macroeconomic shocks on the stock market indices, and then use a Bayesian Vector Autoregressive (BVAR) analysis, which provides insight into the dynamic effects of the shocks on the stock market indices, by allowing us to treat the shocks as exogenous through appropriate setting of priors defining the mean and variance of the parameters in the VAR. The results from the event study indicate that with the exception of the gold mining index, where the CPI surprise plays a significant role, monetary surprise is the only variable that consistently negatively affects the stock returns significantly, both at the aggregate and sectoral levels. The BVAR model based on monthly data, however, indicates that, in addition to the monetary policy surprises, the CPI and PPI surprises also affect aggregate stock returns significantly. However, the effects of the CPI and PPI surprises are quite small in magnitude and are mainly experienced at shorter horizons immediately after the shock.
    Keywords: Bayesian Vector Autoregressive Model, Event Study, Macroeconomic Surprises, Stock Returns.
    JEL: C22 C32 E31 E44 G1
    Date: 2012
  10. By: Andrew Kerr; Francis Teal
    Abstract: In this paper we analyse the relative importance of individual ability and labour market institutions, including public sector wage setting and trade unions, in determining earnings differences across different types of employment. To do this we use the KwaZulu-Natal Income Dynamics Study data from South Africa, which show extremely large average earnings differentials across different types of employment. Our results suggest that human capital and individual ability explain much of the earnings differentials within the private sector, including the union premium, but cannot explain the large premiums for public sector workers. We show that a public sector premium exists only for those moving into the public sector. The paper addresses the challenges of non-random attrition and measurement error bias that panel data bring. Our results show that emphasising a simple binary dichotomy between the formal and informal sector can be unhelpful in attempting to explore how the labour market functions.
    Keywords: Formality; Trade unions; Public sector; Earnings; South Africa
    JEL: J31 J51 J45 O12
    Date: 2012
  11. By: Johan Fourie (Department of Economics, University of Stellenbosch, Utrecht University); Jan Luiten van Zanden (University of Stellenbosch, Centre for Global Economic History, Utrecht University)
    Abstract: New estimates of GDP of the Dutch Cape Colony (1652-1795) suggest that the Cape was one of the most prosperous regions during the eighteenth century. This stands in sharp contrast to the perceived view that the Cape was an “economic and social backwater”, a slave economy with slow growth and little progress. Following a national accounts framework, we find that Cape settlers’ per capita income is similar to the most prosperous countries of the time – Holland and England. We trace the roots of this result, showing that it is partly explained by a highly skewed population structure and very low dependency ratio of slavery, and attempt to link the eighteenth century Cape Colony experience to twentieth century South African income levels.
    Keywords: South Africa, Slave, Income, Growth, GDP Per Capita, Production
    JEL: N37
    Date: 2012
  12. By: Fabrizio Carmignani; Abdur Chowdhury
    Abstract: Despite the recent growth resurgence, Sub-Saharan Africa (SSA) remains the poorest region in the world. At the same time, it is a region that heavily relies on natural resources. In this paper we investigate the extent to which the second fact helps explain the first one. The distinctive feature of our study is that we take a geographical perspective and allow the effect of natural resources to differ across regions of the world. Our findings suggest that (i) the effect of natural resource intensity on per-capita income is positive and significant in general, but almost negligible and possibly negative in SSA, (ii) natural resources have a negative effect on institutional quality in SSA only, (iii) natural resources hinder human capital accumulation in SSA much more than anywhere else, and (iv) the combination of bad disease environments and large resource endowments accounts for most of the observed cross-regional differences in the effect of natural resources.
    Keywords: Development, Sub-Saharan Africa, natural resources, disease, institutions,human capital
    JEL: O11 O55 Q28
    Date: 2011–11–01
  13. By: Peter Montiel; Christopher Adam; Wilfred Mbowe; Stephen O’Connell
    Date: 2012
  14. By: RETAILLE Denis; WALTHER Olivier
    Abstract: To date, geographers have conceptualised the increased mobility of contemporary societies in terms of conflicting or complementary relationships between spaces of places and spaces of flows. These approaches are, however, influenced by a “sedentary” vision of geography, in which mobility is conceived of as movement between relatively fixed locations. Building on earlier work, this article offers a conceptual alternative to this view in which places are predominantly defined by the crossing of flows and are defined as mobile as well. Our aim is to show how the model of the mobile space, originally developed in Sahelian Africa, could be possibly applied to the globalized world. Our model is based on a paradigm in which mobility is considered as the primary driving force of the production of geographic space. This allows us to reconsider both the production of space through movement and the control of space through borders. The paper argues that the way Sahelian societies comprehend space shares similarities with new currents in the globalized world, most notably because mobility and uncertainty have become the foundation of contemporary social organization.
    Keywords: space; mobility; Sahel; West Africa; geography; flows; networks
    Date: 2012–05
  15. By: Hagos, Dagnew; Mekonnen, Alemu; Gebreegziabher, Zenebe
    Abstract: Cities in developing countries experiencing rapid urbanization and population growth too often lack the financial resources and institutional capacity to provide needed municipal infrastructure for adequate solid waste management, despite citizens’ demand for it. This paper uses a cross-sectional survey of 226 randomly selected households in Mekelle City, Ethiopia, to assess the current municipal sanitation fees and the willingness to pay (WTP) of residents for improved urban waste management, and suggests mechanisms for cost recovery. We used Tobit and probit models in the empirical analysis to determine the factors that influence households’ WTP for improved solid waste management. Results reveal that residents’ WTP for improved solid waste management is significantly related to income and awareness of environmental quality, among other factors. Study results reveal that the current city fee for sanitation is far below the WTP of the residents. The mean WTP we found can be a guide for municipal officials in setting a more appropriate fee that can finance improvements in city SWM, where all households receive collection services, waste is disposed of properly, and recycling and composting features are added.
    Keywords: urban waste management, willingness to pay, cost recovery, developing countries, cities
    JEL: D13 Q51 Q53
    Date: 2012–04–27
  16. By: Naci H. Mocan; Colin Cannonier
    Abstract: We use data from Sierra Leone where a substantial education program provided increased access to education for primary-school age children but did not benefit children who were older. We exploit the variation in access to the program generated by date of birth and the variation in resources between various districts of the country. We find that the program has increased educational attainment and that an increase in education has changed women’s preferences. An increase in schooling, triggered by the program, had an impact on women’s attitudes towards matters that impact women’s health and on attitudes regarding violence against women. An increase in education has also reduced the number of desired children by women and increased their propensity to use modern contraception and to be tested for AIDS. While education makes women more intolerant of practices that conflict with their well-being, increased education has no impact on men’s attitudes towards women’s well-being.
    JEL: I12 I15 I18 I21 I25 I28 J13 J18
    Date: 2012–04

This nep-afr issue is ©2012 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.
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