nep-afr New Economics Papers
on Africa
Issue of 2012‒09‒16
six papers chosen by
Quentin Wodon
World Bank

  1. How does Market Access affect Smallholder Behavior? The Case of Tobacco Marketing in Malawi By Wouter Zant
  2. Should African rural development strategies depend on smallholder farms ? an exploration of the inverse productivity hypothesis By Larson, Donald F.; Otsuka, Keijiro; Matsumoto, Tomoya; Kilic, Talip
  3. Exchange Rate and Foreign Interest Rate Linkages for Sub-Saharan Africa Floaters By Alun H. Thomas
  4. Migration, congestion externalities, and the evaluation of spatial investments By Taryn Dinkelman; Sam Schulhofer-Wohl
  5. The rise and fall of (Chinese) African apparel exports By Lorenzo Rotunno; Pierre-Louis Vezina; Zheng Wang
  6. Healing the Wounds: Learning from Sierra Leone's Post-war Institutional Reforms By Katherine Casey; Rachel Glennerster; Edward Miguel

  1. By: Wouter Zant (VU University Amsterdam)
    Abstract: Transaction costs play a key role in the behaviour of smallholders in developing countries. We exploit the quasi experimental design of the introduction of an additional tobacco auction floor in Malawi in order to investigate the impact of a reduction in transaction costs and improved market access on yield and underlying smallholder's decisions on production and area of tobacco, the major cash crop in Malawi. Estimations are based on annual data by Extension Planning Area, 198 in total, fully covering Malawi, for 2003-04 to 2009-10. The estimation results support a statistically significant positive impact of the introduction of a new auction floor on tobacco yield and production of smallholders. Yield increases over the years to 21-25% above base year level. Smallholder production increases are of a similar size with a larger variation, ranging from 12% to 30%. The evidence further suggests that smallholder area is not affected. Results are shown to be robust after controlling for rainfall, fertilizer use, tobacco prices, maize prices and after including the lagged dependent variable.
    Keywords: transaction costs; market access; subsistence; food & cash crops; Malawi; Africa
    JEL: D23 O13 O55 Q11 Q13
    Date: 2012–09–03
  2. By: Larson, Donald F.; Otsuka, Keijiro; Matsumoto, Tomoya; Kilic, Talip
    Abstract: In Africa, most development strategies include efforts to improve the productivity of staple crops grown on smallholder farms. An underlying premise is that small farms are productive in the African context and that smallholders do not forgo economies of scale -- a premise supported by the often observed phenomenon that staple cereal yields decline as the scale of production increases. This paper explores a research design conundrum that encourages researchers who study the relationship between productivity and scale to use surveys with a narrow geographic reach, when policy would be better served with studies based on wide and heterogeneous settings. Using a model of endogenous technology choice, the authors explore the relationship between maize yields and scale using alternative data. Since rich descriptions of the decision environments that farmers face are needed to identify the applied technologies that generate the data, improvements in the location specificity of the data should reduce the likelihood of identification errors and biased estimates. However, the analysis finds that the inverse productivity hypothesis holds up well across a broad platform of data, despite obvious shortcomings with some components. It also finds surprising consistency in the estimated scale elasticities.
    Keywords: Crops&Crop Management Systems,Climate Change and Agriculture,Rural Development Knowledge&Information Systems,Economic Theory&Research,Labor Policies
    Date: 2012–09–01
  3. By: Alun H. Thomas
    Abstract: The paper considers the determinants of exchange rate movements among sub-Saharan countries that have flexible exchange rate regimes. The determinants are based on the law of one price and interest parity conditions. Results indicate that the exchange rates have responded significantly to changes in the US Treasury bill rate and to the EMBI spread in recent years. The effects are more important for countries with open capital accounts. On the other hand the paper does not provide any support for the interest rate parity theory because domestic interest rates have no bearing on exchange rate movements.
    Keywords: Exchange rates , Flexible exchange rate policy , Floating exchange rates , Interest rates , Sub-Saharan Africa ,
    Date: 2012–08–23
  4. By: Taryn Dinkelman; Sam Schulhofer-Wohl
    Abstract: Evaluations of new infrastructure in developing countries typically focus on direct effects, such as the impact of an electrification program on household energy use. But if new infrastructure induces people to move into an area, other local publicly provided goods may become congested, offsetting the benefit of the infrastructure. We use a simple model to show how to measure the net benefit of a place-based program without data on land prices—an indicator that is commonly used to measure congestion in developed countries but that often cannot be used in poor countries because land markets are missing or land prices are badly measured. Our model shows that congestion externalities are especially large when land markets are missing. To illustrate, we estimate the welfare impact of a recent household electrification program in South Africa. Congestion externalities from migration reduced local welfare gains by half.
    Keywords: South Africa
    Date: 2012
  5. By: Lorenzo Rotunno; Pierre-Louis Vezina; Zheng Wang
    Abstract: During the final years of the Multifiber Agreement the US imposed strict import quotas on Chinese apparel while it gave African apparel duty- and quota-free access. The combination of these policies led to a rapid but ephemeral rise of African exports. In this paper we argue that the African success can be explained by a temporary transhipment of Chinese apparel driven by quota-hopping Chinese assembly firms. We first provide a large body of anecdotal evidence on the Chinese apparel wave in African countries. Second, we show that Chinese apparel exports to African countries predict US imports from the same countries and in the same apparel categories but only where transhipment incentives are present, i.e. for products with binding quotas in the US and for countries with preferential access to the US unconstrained by rules of origin. Using input-output linkages, we then show that African countries imported quasi-finished products with little assembly work left to do, rather than primary textile inputs. We estimate that direct transhipment may account for around half of AGOA countries apparel exports.
    Keywords: Transhipment, AGOA, Multifiber agreement
    JEL: F13 O17 O19
    Date: 2012
  6. By: Katherine Casey; Rachel Glennerster; Edward Miguel
    Abstract: While its recent history of civil war, chronic poverty and corrupt governance would cause many to dismiss Sierra Leone as a hopeless case, the country's economic and political performance over the last decade has defied expectations. We examine how several factors—including the legacy of war, ethnic diversity, decentralization and community-driven development (CDD)—have shaped local institutions and national political dynamics. The story that emerges is a nuanced one: war does not necessarily destroy the capacity for local collective action; ethnicity affects residential choice, but does not impede local public goods provision; while politics remain heavily ethnic, voters are willing to cross ethnic boundaries when they have better information about candidates; decentralization can work even where capacity is limited, although the results are mixed; and for all of its promise, CDD does not appear to transform local institutions nor social norms. All of these findings are somewhat “unexpected,” but they are quite positive in signaling that even one of the world’s poorest, most violent and ethnically diverse societies can overcome major challenges and progress towards meaningful economic and political development.
    JEL: F35 H41 O40
    Date: 2012–09

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