nep-afr New Economics Papers
on Africa
Issue of 2012‒09‒09
thirteen papers chosen by
Quentin Wodon
World Bank

  1. Trade policies and agricultural exports of Sub-Saharan African countries: Some stylized facts and perspectives By Douillet, Mathilde
  2. Pre-Colonial Political Centralization and Contemporary Development in Uganda By Sanghamitra Bandyopadhyay; Elliott Green
  4. Violent Development: Toward an economic history of African warfare and military organisation By Richard J. Reid
  5. Household enterprises in Sub-Saharan Africa : why they matter for growth, jobs, and livelihoods By Fox, Louise; Sohnesen , Thomas Pave
  6. The Legacy of Historical Conflict Evidence from Africa By Timothy Besley; Marta Reynal-Querol
  7. Poverty and employment impact of trade liberalization in Nigeria: empirical evidence and policy implications By Balogun, Emmanuel Dele; Dauda, Risikat O. S.
  8. Trade and agricultural policies in Malawi: Not all policy reform is equally good for the poor By Douillet, Mathilde
  9. The sensitivity of the South African industrial sector’s electricity consumption to electricity price fluctuations By Roula Inglesi-Lotz
  10. Rural Policies and Poverty in Tanzania: an Agricultural Household Model-Based Assessment By Marco Tiberti; Luca Tiberti
  11. Seed market liberalization, hybrid maize adoption, and impacts on smallholder farmers in Tanzania By Kathage, Jonas; Qaim, Matin; Kassie, Menale; Shiferaw, Bekele A.
  12. Do UN troops secure crops? Evidence from South Sudan By Raul Caruso; Prabin B. Khadka; Roberto Ricciuti
  13. Can Good Products Drive Out Bad? Evidence from Local Markets for (Fake?) Antimalarial Medicine in Uganda By Björkman Nyqvist, Martina; Svensson, Jakob; Yanagizawa-Drott, David

  1. By: Douillet, Mathilde
    Abstract: It has long been consensual that limited market demand within poor African countries have hampered economic development of Sub-Saharan Africa and that countries therefore needed to rely on exports markets to spur economic growth. But despite benefiting from preferential agreements, Sub-Saharan African countries have been marginalized from global trade. Indicators of the exports of Sub-Saharan African countries are constructed to reflect their characteristics. Existing trade negotiating options are examined in the current context of agricultural markets. It appears that prospects at the regional level arise as well as at the global level, especially when looking at the opportunities from a policy coherence for development perspective. Regional prospects are even more acute in light of the global economic crisis affecting traditional trade partners.
    Keywords: Africa; Trade policy; Agriculture
    JEL: O55 F13 Q17
    Date: 2012–07
  2. By: Sanghamitra Bandyopadhyay; Elliott Green
    Abstract: The importance of pre-colonial history on contemporary African development has become an important .eld of study within development economics in recent years. In particular Gennaioli and Rainer (2007) suggest that pre-colonial political centralization has had an impact on con- temporary levels of development within Africa at the country level. We test the Gennaioli and Rainer (2007) hypothesis at the sub-national level with evidence from Uganda. Using a variety of datasets we obtain results which are striking in two ways. First, we con.rm the Gennaioli and Rainer (2007) hypothesis that pre-colonial centralization is highly correlated with modern- day development outcomes such as GDP, asset ownership and poverty levels, and that these correlations hold at the district, sub-county and individual levels. We also use an instrumental variable approach to con.rm this .nding using the distance from ancient capital of Mubende as an instrument. However, our second .nding is that public goods like immunization coverage and primary school enrolment are not correlated with pre-colonial centralization. These .ndings are thus consistent with a correlation between pre-colonial centralization and private rather than public goods, thereby suggesting the persistence of poverty and wealth from the pre-colonial period to the present.
    Date: 2012–08
  3. By: Beatrice D. Simo-Kengne (Department of Economics, University of Pretoria); Rangan Gupta (Department of Economics, University of Pretoria); Goodness C. Aye (Department of Economics, University of Pretoria)
    Abstract: This paper analyses the relationship between house prices and the trade balance in South Africa using an agnostic identification procedure. This method allows a housing demand shock to be identified in an eight-variable VAR model by imposing sign restrictions on the impulse responses of consumer prices, private consumption, residential investment, nominal interest rate, real house prices and mortgage loan, while trade balance and real effective exchange rate responses are left unrestricted. We apply a Bayesian Vector Autoregressive (BVAR) model to quarterly data from 1979:Q1 to 2011:Q4 and report a sizable effect of house price shocks on trade balance. The results indicate that a 10 percent decline in house prices can improve the trade balance by 5.5 percent. This suggests that house prices represent an additional instrument for trade-balance adjustment besides the traditional exchange rate channel. However, the effect of housing demand shock on the exchange rate is short-lived and insignificant. Therefore, house prices affect the South African trade balance mainly through the wealth and balance sheet effects on private consumption and investment, respectively. Further, we find that the contribution of house price shocks to the historical path of the trade balance is less prominent in 2000s; possibly substantiating the effectiveness in the conduct of South African monetary policy, which has been shown to be incorporating house price movements in its interest rate setting behaviour.
    Keywords: House prices, wealth effect, financial markets, balance of trade, Bayesian VAR
    JEL: C32 E31 E44 F32 R21
    Date: 2012–08
  4. By: Richard J. Reid
    Abstract: The aim of this paper is deceptively simple: What has war achieved in Africa in the last two hundred years? What have the wagers of war aimed to achieve, even if they did not succeed? Why and in what ways has violence failed? This paper represents a preliminary attempt to explore what can broadly be termed the 'economic aspects' of both warfare and military organisation in Africa's modern history — to identify the economic drivers of conflict, as well as the material constraints upon it; to explore the ways in which warfare can be said to have facilitated 'development', broadly defined, as well as bringing about economic catastrophe, or at least severely inhibiting economic growth; and to highlight the degree to which participation in violence, notably as armed combatant, represented material aspiration and offered opportunities for both economic gain and social mobility. At root, it is argued here that the developmental aspects of warfare — viewed over the long term, and understood within local parameters — need to be appreciated alongside its unquestionably highly destructive elements. The paper uses as its timeframe the period since c.1800, a date which — give or take a decade or two on either side, variable from place to place — denotes the beginning of Africa's 'modern era'. In many ways the centrepiece of the thesis presented here is that across much of the continent the 'long' nineteenth century — stretching between the 1780s and the 1920s — witnessed a revolution in military affairs, ongoing aspects of which have had a profound influence on postcolonial Africa. The paper aims to examine the economic dimensions of that revolution and its aftermath, and to place Africa's recent economic and military history in a longer-term context.
    Date: 2012
  5. By: Fox, Louise; Sohnesen , Thomas Pave
    Abstract: Despite 40 percent of households relying on household enterprises (non-farm enterprises operated by a single individual or with the help of family members) as an income source, household enterprises are usually ignored in low-income Sub-Saharan-African development strategies. Yet analysis of eight countries shows that although the fast growing economies generated new private non-farm wage jobs at high rates, household enterprises generated most new jobs outside agriculture. Owing to the small size of the non-farm wage job sector, this trend is expected to continue for the foreseeable future. This analysis of enterprises and their owners shows that although it is a heterogeneous sector within countries, there are many similarities across countries, indicating that cross-country learning is possible. For labor force participants who want to use their skills and energy to create a non-farm income source for themselves and their families, household enterprises offer a good opportunity even if they remain small. The paper finds that given household human capital and location, household enterprise earnings have the same marginal effect on consumption as private wage and salary employment. The authors argue that household enterprises should be seen as part of an integrated job and development strategy.
    Keywords: Labor Markets,Banks&Banking Reform,Population Policies,Labor Policies,Rural Poverty Reduction
    Date: 2012–08–01
  6. By: Timothy Besley; Marta Reynal-Querol
    Abstract: There is a great deal of interest in the causes and consequences of conflict in Africa, one of the poorest areas of the world where only modest economic progress has been made. This paper asks whether post-colonial conflict is, at least in part, a legacy of historical conflict by examining the empirical relationship between conflict in Africa since independence with recorded conflicts in the period 1400 to1700. We find evidence of a legacy of historical conflicts using between-country and withincountry evidence. The latter is found by dividing the continent into 120km_120km grids and measuring the distance from 91 documented historical conflicts. We also provide evidence that historical conflict is correlated with lower levels of trust, a stronger sense of ethnic identity and a weaker sense of national identity.
    Keywords: Conflict, Trust, Identity
    JEL: N47 O43
    Date: 2012–02
  7. By: Balogun, Emmanuel Dele; Dauda, Risikat O. S.
    Abstract: This paper analyzes quarterly data which spans the period 1985 to 2010 to investigate the interrelationship between trade liberalisation, employment dynamics and the implications for poverty alleviation in Nigeria. An overview of macroeconomic trends and patterns during the period show that although the Nigerian economy experienced growth, it was accompanied by rapid rise in unemployment and poverty. The econometric analysis, estimated by systems equation model, related terms of trade, implicit producer price incentives, openness and macroeconomic policy outcomes on agricultural and industrial sector incomes per capita and total trade. The findings tended to show that the fortunes of these sectors deteriorated contrary to the assertion that a positive relationship exists between liberalization and poverty reduction via improved productivity of labor intensive smallholder farm and firms enterprises. While the apparent growth in total trade seemed to be buoyed by positive export supply shocks, deteriorating terms of trade and biased producer incentives structure penalized domestic manufactures and farming, thereby accentuating poverty. This adverse consequence is attributable to the adoption of import substitution industrialization strategy which encouraged the influx of foreign firms that are appendages of multinationals. In concluding, the paper calls for a shift in policy approach to economic development from the pervasive import substitution trade strategies which tended to displace labor to an export led strategy guided by the doctrine of factor endowments.
    Keywords: Trade liberalization; Employment; Poverty reduction
    JEL: F16 C32
    Date: 2012–08–26
  8. By: Douillet, Mathilde
    Abstract: The reduction of the existing global distortions to agricultural incentives is sometimes stated as a priority to fight poverty worldwide. But the impacts of global trade policy and domestic development policy reforms are rarely, if ever, compared. Despite technical limitations hindering rigorous comparison of the overall growth effects, also hampering cost-benefit analysis, this paper contributes at filling this gap by focusing on the comparison of the distributional poverty impacts of both types of policies. It uses the MIRAGE global computable general equilibrium –CGE- model feeding a national CGE model representing Malawi in 2007 linked to household survey to examine how different trade policy reforms by Malawi and the rest of the world would impact poverty in Malawi. The country’s recent agricultural growth history due to the Fertilizer Input Subsidy Program is replicated and compared with a more broad-based sectoral approach. The effects of accelerating growth in agriculture and downstream sectors are compared with those of integrating in the regional and multilateral markets. Non preferential trade policy reforms are found to be less favourable for poverty reduction of the poorest than regional integration or preferential integration. Faster intensification and diversification of agriculture is found to enable targeting the poorest that are less likely to be connected to international markets. Therefore, while policy reforms generating growth in general may be good for some poors, it is found that that not all policy reforms are equally good. Thus, despite the fact that trade policies could help fight poverty in Malawi, there are no substitute to development policies, and if undertaken simultaneously, their coherence should be checked thoroughly.
    Keywords: Malawi; Economic Growth; Trade policy; Agricultural Policy; Poverty; Computable General Equilibrium
    JEL: F13 O55 Q17 D58 Q18
    Date: 2012
  9. By: Roula Inglesi-Lotz (Department of Economics, University of Pretoria, South Africa)
    Abstract: Numerous studies have assumed that the price elasticity of electricity demand remains constant through the years that is industrial consumers behave the same way to price fluctuations regardless the actual price level. This paper proposes that the price elasticity of industrial electricity demand is time varying. To do so, the Kalman filter methodology is employed in an effort to provide the policy makers with more information on the behaviour of the industrial sector with regards to electricity price changes, focusing on the period from 1970 to 2007. To capture other factors affecting electricity consumption, such as real output and employment are also included in the specification. The findings show that price sensitivity changed since the 1970s: it has decreased in absolute values from -1 in 1980 to -0.953 in 1990 and then stabilised at around -0.95 showing that the industrial sector has experienced an inelastic demand. In other words, the behaviour of the industrial consumers did not vary significantly in the 2000s. In the long run and as the prices increase, probably reaching the levels of the 1970s or even before, the industrial sector’s behaviour might change and the elasticity might end up at levels higher than one (elastic).
    Keywords: Electricity consumption; Kalman filter; price elasticity; industrial sector
    Date: 2012–08
  10. By: Marco Tiberti; Luca Tiberti
    Abstract: The main objective of this study is to develop a robust and comprehensive tool to evaluate the effect on households’ welfare of different agricultural policies in Tanzania. This is done through a non-separable agricultural household model where production and consumption decisions are considered. In particular, we look at labour market failure, since this is among the major constraints in a context like rural Tanzania. Non-separability implies that production and consumption decisions are interlinked and that labour allocation is likely to be determined by shadow wages rather than market wages. A two-stage estimation strategy is adopted: the shadow price of family labour is first estimated and then included into the production and demand systems. The impact of a number of agricultural policies on poverty is then estimated. In particular, we evaluate the impact of policies established by the Agricultural Sector Development Programme, as well as changes in food prices.
    Keywords: Agricultural household models, poverty, agricultural policies, Tanzania
    JEL: D12 O12 O13 Q12 Q18
    Date: 2012
  11. By: Kathage, Jonas; Qaim, Matin; Kassie, Menale; Shiferaw, Bekele A.
    Abstract: Since the early 1990s, liberalization of the seed market in Tanzania has attracted several foreign companies that now market maize hybrids in the country. In this article, we analyze the impacts of proprietary hybrids on maize yields, production, and household living standards. We build on a recent survey of smallholder maize farmers in two zones of Tanzania. Hybrid adoption rates are 48% and 13% in the North and East, respectively. Average net yield gains of hybrids are 50-60%, and there are also significant profit effects. Geographical disaggregation reveals that the benefits have mostly occurred in the North, which also explains higher adoption there. In the North, hybrid adoption caused a 17% increase in household living standards. We conclude that proprietary hybrids can be suitable for semi-subsistence farms and that seed market liberalization has generated positive socioeconomic developments.
    Keywords: seed market liberalization, farm survey, technology adoption, household living standards, Tanzania, Industrial Organization, International Development, Production Economics, Research and Development/Tech Change/Emerging Technologies, I31, Q12, Q13, Q16,
    Date: 2012–05
  12. By: Raul Caruso (Catholic University of the Sacred Heart); Prabin B. Khadka (Georgetown University); Roberto Ricciuti (Department of Economics (University of Verona))
    Abstract: In this note we analyse the relationship between the deployment of United Nations Blue Helmets and cereal production, using the 78 South Sudan counties over 2007-2011 as a test ground. We find a negative effect of the UN troops/area ratio, but their effect is positive in areas that are badly damaged by conflict.
    Keywords: United Nations, Blue helmets, South Sudan, cereal production, peacekeeping.
    JEL: D74 F53
    Date: 2012–07
  13. By: Björkman Nyqvist, Martina; Svensson, Jakob; Yanagizawa-Drott, David
    Abstract: Counterfeit and sub-standard antimalarial drugs present a growing threat to public health. This paper investigates the mechanisms that determine the prevalence of fake antimalarial drugs in local markets, their effects, and potential interventions to combat the problem. We collect drug samples from a large set of local markets in Uganda using covert shoppers and employ Raman spectroscopy to test for drug quality. We find that 37 percent of the local outlets sell fake antimalarial drugs. Motivated by a simple model, we conduct a market-level experiment to test whether authentic drugs can drive out fake drugs from the local market. We find evidence of such externalities: the intervention reduced prevalence of substandard and counterfeit drugs in incumbent outlets by half. We also provide suggestive evidence that misconceptions about malaria lead consumers to overestimate antimalarial drug quality, and that opportunistic drug shops exploit these misconceptions by selling substandard and counterfeit drugs. Together, our results indicate that high quality products can drive out low quality ones, but the opposite is true when consumers are less able to infer product quality.
    Keywords: ACT; asymmetric information; counterfeit medicine; field experiment; Malaria
    JEL: D83 I15 O12
    Date: 2012–09

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