nep-afr New Economics Papers
on Africa
Issue of 2012‒07‒14
fourteen papers chosen by
Quentin Wodon
World Bank

  1. Inequality Traps and Human Capital Accumulation in South Africa By Miquel Pellicer; Vimal Ranchhod
  2. Trends and Structural Changes in South African Macroeconomic Volatility By Stan Du Plessis; Kevin Kotze
  3. Adaptation to Climate Change by Smallholder Farmers in Tanzania By Coretha Komba; Edwin Muchapondwa
  4. Self-assessed well-being: Analysis of the NIDS Wave 1 and 2 Datasets By Dorrit Posel
  6. Wealth in the National Income Dynamics Study Wave 2 By Reza C. Daniels,; Arden Finn; Sibongile Musundwa
  7. Health: Education: Analysis of the NIDS Wave 1 and 2 Datasets By Nicola Branson; David Lam; Linda Zuze
  8. Health: Analysis of the NIDS Wave 1 and 2 Datasets By Cally Ardington; Boingotlo Gasealahwe
  9. Impact of tissue culture banana technology in Kenya: A difference-in-difference estimation approach By Enoch M. Kikulwe; Nassul .S. Kabunga; Matin Qaim
  10. Is Chad affected by Dutch or Nigerian disease? By Kablan, Sandrine; Loening, Josef
  11. Determinants of Labor-Intensive Exports by the Developing Countries: A Cross Country Analysis By Mottaleb Khondoker; Kaliappa Kalirajan
  12. Cooperation behaviour and innovation performance in the Nigerian manufacturing industry By Abiodun A. Egbetokun
  13. Labour Market: Analysis of the NIDS Wave 1 and 2 Datasets By Paul Cichello; Murray Leibbrandt; Ingrid Woolard
  14. Impact of Rising World Rice Prices on Poverty and Inequality in Burkina Faso By Félix Badolo; Fousseini Traore

  1. By: Miquel Pellicer (SALDRU, School of Economics, University of Cape Town); Vimal Ranchhod (SALDRU, School of Economics, University of Cape Town)
    Abstract: We consider the interaction between human capital accumulation and inequality in South Africa. We start by discussing three alternative theoretical frameworks that relate inequality and investment decisions in post-secondary education; namely the 'perfect credit markets hypothesis', the 'imperfect credit markets hypothesis' and the 'social externalities hypothesis'. Each of these suggests different policy implications. We then consider which of these seems to have the most validity in the South African context, by presenting some original analysis as well as considering some of the related literature. Our findings suggest that South Africa is indeed in an 'inequality trap' situation and that credit markets do not work well. There is some evidence that social externalities compound the effects of the imperfect credit markets. We conclude with a discussion of possible policy directions. These include information on eligibility to tertiary institutes of education, awareness campaigns regarding public financing options, subsidization of application and registration fees and efforts to improve school quality at the primary and secondary levels.
    Keywords: Nids Data
    Date: 2012
  2. By: Stan Du Plessis; Kevin Kotze
    Abstract: The international financial crisis that started in 2007 and the subsequent end of the long expansion in South Africa has refocused attention on the business cycle. Prior to the crisis, the economies of both developed and developing countries experienced an extended period of low and stable inflation and stable real economic growth, an episode that has been called the "great moderation". The disruption of this era by the financial crisis has highlighted the importance of understanding the nature and causes of the great moderation, to assist policy makers in facilitating its resumption. This paper considers the historical evidence for the great moderation in South Africa with the aid of a time-varuing stochastic volatility model and various break-point tests
    Keywords: Business cycles, emerging market economies, quantitative analysis of business cycles
    JEL: C32 E32
    Date: 2012
  3. By: Coretha Komba; Edwin Muchapondwa
    Abstract: In Sub-Saharan Africa, climate change is set to hit the agricultural sector the most and cause untold suffering particularly for smallholder farmers. To cushion themselves against the potential welfare losses, smallholder farmers need to recognize the changes already taking place in their climate and undertake appropriate investments towards adaptation. This study investigates whether smallholder farmers in Tanzania recognize climate change and consequently adapt to it in their agricultural activities. The study also investigates the factors influencing their choice of adaptation methods to climate change To do this, the study collected and analyzed data from 556 randomly selected households in a sample of districts representing the six agro-ecological regions of the country. The data shows that Tanzanian smallholder farmers have observed changes in mean and variance precipitation and temperature and responded to it The farmers have generally used shortseason crops, drought-resistant crops, irrigation, planting dates and tree planting to adapt to the potential negative impacts of climate change on their agricultural yields. A binary logit model is used to investigate the factors influencing a famer's decision to undertake any adaptation at all to climate change while a multinomial logit model is used to investigate the factors influencing farmers' choice of specific adaptation methods. The Tanzanian government needs to help smallholder farmers overcome constraints they face in taking up adaptation to climate change. Furthermore, the government can play a significant role by promoting adaptation methods appropriate for particular circumstances e.g. particular crops or agro-ecological zones
    Keywords: Adaptation methods, smallholder farmers, agro-ecological zones, climate change, Tanzania.
    JEL: Q10 Q12 Q51 Q54 Q57
    Date: 2012
  4. By: Dorrit Posel
    Abstract: Most nationally representative household surveys in South Africa collect data on money-metric measures of well-being (income and expenditure), which are then used to generate statistics on poverty and inequality. However, these measures may be limited in several ways. First, they typically are not able to identify differences in economic well-being within the household when all resources in the household are not equally shared. Second, income received or spent captures only one aspect of economic status specifically and of well-being more generally, and a wide range of other factors will also affect an individual's quality of life
    Keywords: Nids Data
    Date: 2012
  5. By: Beatrice D. Simo-Kengne (Department of Economics, University of Pretoria); Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, North Cyprus,via Mersin 10, Turkey); Rangan Gupta (Department of Economics, University of Pretoria); Monique Reid (Department of Economics, Stellenbosch University); Goodness C. Aye (Department of Economics, University of Pretoria)
    Abstract: This paper examines asymmetries in the impact of monetary policy on the middle segment of the South African housing market from 1966:M2 to 2011:M12. We use Markov-switching vector autoregressive (MS-VAR) models in which parameters change according to the phase of the housing cycle. The results suggest that monetary policy is not neutral as house price growth decreases substantially with a contractionary monetary policy. We find that the impact of monetary policy is larger in bear regime than in bull regime; indicating the role of information asymmetry in reinforcing the financial constraint of economic agents. As expected, monetary policy reaction to a positive house price shock is found to be stronger in the bull regime. This suggests that central banker reacts more in bull regime in order to prevent potential crisis related to the subsequent bust in house prices bubbles which are more prominent in bull markets. These results substantiate important asymmetries in the dynamics of house prices in relation to monetary policy, vindicating the advantages of generating regime dependent impulse response functions.
    Keywords: Monetary policy, House prices, Regime switching
    JEL: C22 C32 E52 R31
    Date: 2012–07
  6. By: Reza C. Daniels, (SALDRU, School of Economics, University of Cape Town); Arden Finn (SALDRU, School of Economics, University of Cape Town); Sibongile Musundwa (SALDRU, NIDS, School of Economics, University of Cape Town)
    Abstract: This document investigates the composition and distribution of individual and household wealth in the National Income Dynamics Study (NIDS) Wave 2 dataset (SALDRU, 2010-2011). The NIDS Wave 2 instrument marks the first time in South Africa that a nationally representative household survey obtained sufficient information to calculate individual and household net worth. As such, it represents a very important contribution to the stock of knowledge on these concepts, and the dataset itself also contains rich information on concepts related to wealth, such as income, expenditure, savings and debt.
    Keywords: Nids Data
    Date: 2012
  7. By: Nicola Branson (SALDRU, School of Economics, University of Cape Town); David Lam (University of Michigan); Linda Zuze
    Abstract: Education is a major focus of attention in the National Income Dynamics Study (NIDS). With the release of Wave 2 NIDS provides the first longitudinal data ever collected on education in a national household survey in South Africa. This makes it possible to study transitions in and out of school and transitions across grades in ways that have never before been possible. This report analyzes NIDS Wave 1 and 2 data corresponding to the sections of the questionnaires that are most specifically related to education –Module C of the child questionnaire, Module H of the adult questionnaire, and Module E of the proxy questionnaire. While many of the questions in these modules are similar to questions on other national surveys, tracking the same individuals across time allows us to identify changes over time while controlling for individual level characteristics. NIDS collects schooling information at each wave and for intermediate years. As such, by wave 2 there is information on the respondent's grade and enrolment status for each year 2007 (the year before Wave 1) through 2010 (the year of Wave 2). In addition, the outcome for each year 2007 through 2009 is collected.
    Keywords: Nids Data
    Date: 2012
  8. By: Cally Ardington (SALDRU, School of Economics, University of Cape Town); Boingotlo Gasealahwe
    Abstract: This report examines the health data from the second wave of the NIDS with a view to assessing the strengths and weakness of the data and highlighting the potential of the NIDS panel for the analysis of the relationship between health status and socio-economic status in South Africa. We begin by investigating associations between health and changes in the panel composition. We then examine data quality both within and between the waves, focussing on item non-response within waves and data consistency between waves. The final section examines changes in nutritional status between the waves of the panel. The analyses in this report are descriptive, preliminary and very much intended to illustrate the potential of the NIDS panel for furthering our understanding of the links between health and socio-economic status.
    Keywords: Nids Data
    Date: 2012
  9. By: Enoch M. Kikulwe (Georg-August-University Göttingen); Nassul .S. Kabunga (International Food Policy Research Institute, Kampala, Uganda); Matin Qaim (Georg-August-University Göttingen)
    Abstract: Most micro-level studies on the impact of agricultural technologies build on cross-section data, which can lead to unreliable impact estimates. Here, we use panel data covering two time periods to estimate the impact of tissue culture (TC) banana technology in the Kenyan small farm sector. TC banana is an interesting case, because previous impact studies showed mixed results. We combine propensity score matching with a difference-in-difference estimator to control for selection bias and account for temporal impact variability. TC adoption has positive impacts on banana productivity and profits. The technology increases yields by 40-50% and gross margins by around 100%. These large effects represent the impact of TC technology in combination with improved management practices and higher input use, which is recommended. Looking at the isolated TC effect may underestimate impact because of synergistic relationships. The results suggest that extension efforts to deliver the technological package to smallholder farmers should be scaled up.
    Keywords: Agricultural technology; Difference-in-difference; Selection bias; Temporal impact variability; Impact; Kenya
    Date: 2012–07–06
  10. By: Kablan, Sandrine; Loening, Josef
    Abstract: We examine the effects of the ‘natural resource curse’ on Chad and find little evidence for Dutch disease. Structural vector auto-regression suggests that changes in domestic output and prices are overwhelmingly determined by aggregate demand and supply shocks, and while oil production and high international prices negatively affect agricultural output, the effects are small. Consistent with empirical evidence for neighbouring Cameroon, we observe minimal impact on Chad’s manufacturing sector. We associate our findings with structural underemployment and the inefficient use of existing production factors. In this context, increased public expenditures in tradable sectors present the opportunity to make oil revenues an engine of national development.
    Keywords: Natural resource curse; Dutch disease; Chad; Structural VAR
    JEL: O11 E32 E30 O13 E61
    Date: 2012–06–30
  11. By: Mottaleb Khondoker; Kaliappa Kalirajan
    Abstract: While it is widely recognized that industrial development is imperative in developing countries to reduce poverty and to attain sustainable economic growth, there is no consensus on how to develop industries and where to start. Generally, the literature argues that developing countries should concentrate on promoting labour intensive industries and exports first due to their low capital stock and relatively abundant labor force. Though many developing countries are attempting to follow this path, the interesting observation is that not all developing countries are reaping the benefits of promoting labor intensive industries in terms of employment generation and sustaining economic growth. This raises an important question as to how it is possible for some developing countries to enjoy more benefits from labor intensive industries, while others are not able to do so. Using cross-country panel data in explaining heterogeneous performance in exporting labor intensive products by the developing countries, an attempt has been made in this paper to identify the important factors over and above the conventional factors such as low labor wages that contribute to the sustained growth of labor intensive exports from developing countries. The empirical findings of this paper emphasizes that even to initiate and sustain the growth of the low value added industries, such as garments, the developing countries should develop basic infrastructure and maintain a friendly business environment.
    Keywords: Developing Country, Garment and textile export, Infrastructure, Business environment, ASIA, Sub-Saharan Africa
    JEL: L67 F14 O14
    Date: 2012
  12. By: Abiodun A. Egbetokun (Friedrich-Schiller University, Graduate College "Economics of Innovative Change", and National Centre for Technology Management (Federal Ministry of Science and Technology), Obafemi Awolowo University, Nigeria)
    Abstract: Analysing the relationship between firms' openness to external knowledge and their innovation performance is nothing new. What is new is studying how this relationship fares in latecomer economic contexts such as Nigeria, and that is the focus of this paper. Using unique micro-level innovation data, it is shown, as the existing literature suggests, that firms are more likely to innovate when they access external knowledge either through formal or through informal interactions. However, innovative firms that exploit external knowledge do not necessarily enjoy greater innovation benefits than those that do not. Thus, while openness to external knowledge might help firms to become better at innovating, it does not assist them in reaping the benefits derivable from their innovation efforts. Moreover, different innovation types are essentially the same with respect to the effect that network resources have on them. Thus, it makes little sense to engage network partners selectively for certain innovation types at the expense of others.
    Keywords: innovation, networking, openness, collaboration, external knowledge, Nigeria, manufacturing industry
    JEL: O31 L14 L60
    Date: 2012–07–09
  13. By: Paul Cichello; Murray Leibbrandt (SALDRU, School of Economics, University of Cape Town); Ingrid Woolard (SALDRU, School of Economics, University of Cape Town)
    Abstract: This paper provides a brief summary of key labour market outcomes in Wave 2 of NIDS and also examines labour market transitions that occurred between Wave 1 and Wave 2. This corresponds approximately to changes between 2008 and 2010. The primary purpose of this paper is to spur discussion of these initial findings and to encourage more detailed analytical work on the labour market using the NIDS data.
    Keywords: Nids Data
    Date: 2012
  14. By: Félix Badolo (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I); Fousseini Traore (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)
    Abstract: Between January 2006 and April 2008, the prices of most of the agricultural products considerably rose in international markets. Empirical studies show that this spike in world food prices has increased the number of poor households in developing countries, but the magnitude is not the same in all countries. This paper assesses the impact of rising rice price on poverty and income inequality in Burkina Faso. We use a methodology based on the concept of compensating variation combined with the net benefit ratio (NBR) developed by Deaton (1989) and living standard survey (QUIBB, 2003). The results show that higher rice prices have a negative impact on income and poverty in the regions with a large proportion of households who are net buyers of rice. The poverty rate increases by 2.2 to 2.9 percentage points depending on the assumptions. The increase in poverty increase is higher in urban areas than in rural areas. Rising rice prices also increase income inequality. Income inequality particularly increases in urban areas and in relatively rich regions, but it decreases in poor regions with an important proportion of rice producers.
    Keywords: Measuring and analysis of poverty;farm household;Price
    Date: 2012–06–29

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