nep-afr New Economics Papers
on Africa
Issue of 2013‒08‒31
fifteen papers chosen by
Quentin Wodon
World Bank

  1. The viability of an economic and monetary union in Africa with a unified currency: evidence from the African economies' reactions to the international income, price and monetary shocks By Giscard Assoumou Ella
  2. Essai sur le système financier: une analyse du marché du crédit en Afrique Subsaharienne By Thiombiano, Lardia Marcel
  3. Adult Mortality, AIDS and Fertility in Rural Malawi By Durevall, Dick; Lindskog, Annika
  4. Entrepreneurship and the Business Environment in Africa: An Application to Ethiopia By Brixiova, Zuzana; Ncube, Mthuli
  5. Corruption along ethnic lines: A study of individual corruption experiences in 17 African countries By Isaksson, Ann-Sofie
  6. Disease Control, Demographic Change and Institutional Development in Africa By Margaret S. McMillan; William A. Masters; Harounan Kazianga
  7. Military Expenditure, Economic Growth and Structural Instability: A Case Study of South Africa By Goodness C. Aye; Mehmet Balcilar; John P. Dunne; Rangan Gupta; Renee van Eyden
  8. Desired Fertility and Children Born across Time and Space By Isabel Günther; Kenneth Harttgen
  9. Cash Transfers and Child Schooling: Evidence from a Randomized Evaluation of the Role of Conditionality By Richard Akresh; Damien de Walque; Harounan Kazianga
  10. Industrialization Lessons from BRICS: A Comparative Analysis By Naudé, Wim; Szirmai, Adam; Lavopa, Alejandro
  11. The Causal Nexus between Financial Development and Economic Growth in Kenya By Uddin, Gazi Salah; Sjö, Bo; Shahbaz, Muhammad
  12. RD Congo : une croissance sans développement? By Kambale Mirembe, Omer
  13. Trade Performance of the Less Developed African Countries By Fontoura, Maria P.; Crespo, Nuno
  14. With a little help from my friends: Supplying to multinationals, buying from multinationals, and domestic firm performance By Holger Görg; Adnan Seric
  15. Fiscal sustainability in Burundi : baseline projections, stochastic simulations, and policy scenarios By Kida, Mizuho

  1. By: Giscard Assoumou Ella (LEAD - Laboratoire d'Économie Appliquée au Développement - Université Sud Toulon Var)
    Abstract: The purpose of this paper is to provide a framework to analyze the feasibility of an economic and monetary union in Africa with a common currency. In this context, the present study has two objectives. The first one is to analyze the impacts of the international income, price and monetary shocks on real GDP, household consumption and consumer prices index in 17 African countries using a SVAR model for the period 1970-2007. The research methodology adopted in this study suggests that 16 countries are exposed to the international income shock, nine to the international price shock and 10 to the international monetary shock. A decrease in real OECD GDP has a negative impact on real GDP, household consumption and consumer prices index, and inversely in the case of an increase. A decrease in current Federal funds effective rate has a positive effect on those variables, and inversely. World price of oil impacts essentially African oil producers, with a decrease affecting negatively their economies and an increase positively. The second one is to compare African economies' orthogonal impulse response functions to those international shocks. It can be observed that the functions tend to be similar in the cases of the real GDP and household consumption's reactions, and more or less similar in the case of the consumer prices index responses. This analysis emphasizes that the possibility of creating an economic union in Africa with a common currency does exist.
    Keywords: African economies, international income, price and monetary shocks, SVAR model
    Date: 2013–05–26
  2. By: Thiombiano, Lardia Marcel
    Abstract: This paper aims to characterize the behavior of economic agents on Sub-Saharan Africa’s credit market in order to understand the financial exclusion of poor households. Through its theoretical approach, it gives a description of the functioning of the credit market. By considering the social interactions (social signal) as a starting point and the main determinant of the economic fact, it leads to three main results: (i) the credit supply is inversely proportional to interest rate, (ii) the need for social mobility (the pursuit of a better-being) is the main determinant of the credit demand, (iii) the financial market in Sub-Saharan Africa has three formal segments and one informal segment. Moreover, it demonstrates that in the credit market of Sub-Saharan Africa, the imbalance is the rule because only one of the four segment is in balance. Furthermore this paper notes the lack of social mobility for the poor when there is no external intervention.
    Keywords: credit market, poverty, social mobility, welfare
    JEL: G21 I31 O16
    Date: 2013
  3. By: Durevall, Dick (Department of Economics, School of Business, Economics and Law, Göteborg University); Lindskog, Annika (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: The impact of HIV/AIDS on fertility in sub-Saharan Africa has received attention recently, since changes in population structure can impact on future economic development. We analyze the effect of AIDS on actual and desired fertility in rural Malawi, using data from Malawi 2004 Demographic and Health Survey and population censuses. Since AIDS was the dominating cause of death during the 1990s and early 2000s, we use prime-age adult mortality as the key explanatory variable. The focus is on heterogeneity in the response of gender-specific mortality rates. By estimating ordered probit models we show that actual fertility responds positively to male mortality but negatively to female mortality, and that the overall fertility response is positive but small. One interpretation of the findings is that the effects of female and male mortality differ because of an old-age security motive for having children. When a woman risks death before her children grow up, she is less likely to need support of children and demand should be low, but when the risk of husband’s death is high, the woman should expect to rely more on children’s support.
    Keywords: AIDS; demand for children; fertility; HIV; adult mortality; old age security
    JEL: I10 J13 O12
    Date: 2013–08–15
  4. By: Brixiova, Zuzana (African Development Bank); Ncube, Mthuli (African Development Bank)
    Abstract: Since mid-2000s, Ethiopia has been one of the fastest growing countries in the world. However, productive entrepreneurship in high-value added activities has made limited contributions to this growth, in part because of a weak business environment. Moreover, the low-productive firms in the informal sector still account for a large share of employment. Reflecting these facts, this paper presents a model of costly entrepreneurial start-ups in an economy with a large informal sector and rigid business environment where an equilibrium outcome can be a low-skill, low-productivity trap. By fostering productive start-ups and skilled employment, creation of an enabling business environment could help move the Ethiopian economy into high-productivity equilibrium.
    Keywords: entrepreneurship, SME start-ups, low productivity trap, multiple equilibria, Africa
    JEL: L26 J24 J48 O17
    Date: 2013–08
  5. By: Isaksson, Ann-Sofie (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: While a growing literature relates macro variation in corruption to ethnic divisions, existing studies have paid little attention to the possible existence of systematic micro variation in corruption along ethnic lines. The present paper examines whether individual corruption experiences vary systematically depending on ethnic group affiliation, and what the nature of this possible variation is. More specifically, it considers the effect of belonging to influential ethnic groups. Empirical findings drawing on data for more than 23,000 respondents in 17 African countries indeed suggest that individual corruption experiences vary systematically along ethnic lines. Belonging to influential ethnic groups – in terms of relative group size or relative economic and political standing – is associated with a greater probability of having experienced corruption. Assuming that belonging to a larger and economically/politically stronger group helps proxy for a greater probability of the corrupt public official being a co-ethnic, this should imply more corruption among co-ethnics, supporting the idea that enforcement mechanisms within ethnic groups could act to strengthen corrupt contracts. The results depend on the type of corruption considered, though; when focusing on a more clearly extortive form of corruption, there is less evidence of collusive behaviour.
    Keywords: corruption; ethnic groups; Africa; afrobarometer
    JEL: D73 O12 O55
    Date: 2013–08–15
  6. By: Margaret S. McMillan (Tufts University, IFPRI and NBER); William A. Masters (Tufts University); Harounan Kazianga (Oklahoma State University)
    Abstract: This paper addresses the role of tropical disease in rural demography and land use rights, using data from Onchocerciasis (river blindness) control in Burkina Faso. We combine a new survey of village elders with historical census data for 1975-2006 and geocoded maps of treatment under the regional Onchocerciasis Control Program (OCP). The OCP ran from 1975 to 2002, first spraying rivers to stop transmission and then distributing medicine to help those already infected. Controlling for time and village fixed effects, we find that villages in treated areas acquired larger populations and also had more cropland transactions, fewer permits required for cropland transactions, and more regulation of common property pasture and forest. These effects are robust to numerous controls and tests for heterogeneity across the sample, including time-varying region fixed effects. Descriptive statistics suggest that treated villages also acquired closer access to electricity and telephone service, markets, wells and primary schools, with no difference in several other variables. These results are consistent with both changes in productivity and effects of population size on public institutions.
    Keywords: West Africa, Burkina Faso, Public Health, Land Rights, Rural Infrastructure.
    Date: 2013–06
  7. By: Goodness C. Aye (Department of Economics, University of Pretoria); Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Famagusta, North Cyprus,via Mersin 10, Turkey); John P. Dunne (School of Economics, University of Cape Town, Cape Town, South Africa); Rangan Gupta (Department of Economics, University of Pretoria); Renee van Eyden (Department of Economics, University of Pretoria)
    Abstract: This paper makes two contributions to the growing literature on the military expenditureeconomic growth nexus. It provides a case study of a developing country, South Africa, and considers the possibilities of structural breaks in the relationship, applying newly developed econometric methods. Taking annual data from 1951 to 2010 and using full sample bootstrap Granger non-causality tests, no Granger causal link is found between military expenditure and GDP. Then, using parameter instability tests, the estimated VARs are found to be unstable and when a bootstrap rolling window estimation procedure is used to deal with time variation in the parameters, bidirectional Granger causality between the two series becomes evident in various subsamples. While military expenditure has positive predictive power for GDP at certain initial periods, it has negative predictive power at some later periods in the sample. Similar results were obtained for the causality running from GDP to military expenditure. These findings illustrate that conclusions based on the standard Granger non-causality tests, which neither account for structural breaks nor time variation in the relationship may be invalid.
    Keywords: Military spending, Economic growth, Bootstrap, Time varying causality
    JEL: C32 H56 O40
    Date: 2013–08
  8. By: Isabel Günther (ETH Zurich); Kenneth Harttgen (ETH Zurich)
    Abstract: With about five children born per woman and a population growth rate of 2.5 per cent per year, sub-Saharan Africa has been the world’s fastest growing region over the last decade. Economists have often argued that high fertility rates are mainly driven by women’s demand for children (and not by family planning efforts) with low levels of unwanted fertility across countries (and hence with little room for family planning efforts to reduce population growth). We study the relationship between wanted fertility and number of children born in a panel of 200 country-years controlling for country characteristics and global trends. In general, we find a close relationship between wanted and actual fertility, with one desired child leading to one additional birth. However, our results also indicate that in the last 20 years the level of unwanted births has stayed at two across sub-Saharan Africa whereas it has decreased from one to zero in other developing countries. Hence, women in African countries are less able to translate child preferences into birth outcomes than women in other developing countries, i.e. leaving plenty of room for family planning efforts; and forces other than fertility demand have been important for fertility declines in other developing countries. Family planning efforts only partly explain the observed temporal and spatial differences in achieving desired fertility levels.
    Keywords: Fertility; Population Growth; Development; Population Policies
    JEL: J10 J13
    Date: 2013–08–23
  9. By: Richard Akresh (University of Illinois at Urbana-Champaign); Damien de Walque (The World Bank, Washington DC); Harounan Kazianga (Oklahoma State University)
    Abstract: We conduct a randomized experiment in rural Burkina Faso to estimate the impact of alternative cash transfer delivery mechanisms on education. The two-year pilot program randomly distributed cash transfers that were either conditional (CCT) or unconditional (UCT). Families under the CCT schemes were required to have their children ages 7-15 enrolled in school and attend classes regularly. There were no such requirements under the unconditional programs. Results indicate that UCTs and CCTs have a similar impact increasing the enrollment of children who are traditionally favored by parents for school participation, including boys, older children, and higher ability children. However, CCTs are significantly more effective than UCTs in improving the enrollment of "marginal children" who are initially less likely to go to school, such as girls, younger children, and lower ability children. Thus, conditionality plays a critical role in benefiting children who are less likely to receive investments from their parents.
    Keywords: Cash transfers; Conditionality; Education; Africa
    JEL: I21 I25 I38 J13 O15 C93
    Date: 2013–01
  10. By: Naudé, Wim (Maastricht School of Management); Szirmai, Adam (Maastricht University); Lavopa, Alejandro (Maastricht University)
    Abstract: To date there has been few systematic and comparative empirical analyses of the nature of economic development in Brazil, Russia, India, China and South Africa (BRICS). We contribute to addressing this gap by exploring the patterns of structural change between 1980 and 2010, focusing on the manufacturing sector. We show that three of the BRICS are experiencing de-industrialization (Brazil, Russia and South Africa). China is the only country where an expanding manufacturing sector accounts for a significant part of aggregate growth. We explore the differences in patterns and causes of manufacturing between China and the other BRICS. These differences are down to differences in industrial policy: in China industrial policy supported both foreign and domestic investment for technological catch-up. It is the only country where FDI favoured the manufacturing sector and manufactured exports, and where domestic investment started becoming increasingly important compared to FDI from 1995 onward.
    Keywords: foreign direct investment, multinational enterprises, industrialization, technology, innovation, entrepreneurship, Brazil, Russia, China, India, South Africa
    JEL: F23 L52 L53 O25 O40 O33 O34
    Date: 2013–08
  11. By: Uddin, Gazi Salah; Sjö, Bo; Shahbaz, Muhammad
    Abstract: This paper aims to reexamine the relationship between financial development and economic growth in Kenya over the period of 1971-2011. Since, financial sector plays a vital role in mobilizing and allocating savings into productive ventures, the core issue of this investigation remains important for developing economics. The examination is based on a Cobb-Douglas production augmented by incorporating financial development. A simulation based ARDL bounds testing and Gregory and Hansen’s structural break cointegration approaches are being utilized in this study. Cointegration is being found between the series in the presence of a structural break in 1992. It is also being established that, in the long run, development of financial sector has positive impact on economic growth. Here remains an important policy implication for the concerned individuals of Kenya, that is, they may emphasize on financial development to ignite economic growth.
    Keywords: Economic Growth, Financial Development, Kenya
    JEL: C1
    Date: 2013–08–03
  12. By: Kambale Mirembe, Omer
    Abstract: According to the Congolese government, the Democratic Republic of Congo (DRC) realized good macroeconomic performance over the past few years. It is now entering economic and social development phase. But what is the reality behind such optimism? Does economic growth contribute to poverty reduction in the DRC? We find that notwithstanding significant achievements with regard to the macroeconomic framework, there has not been poverty reduction in the DRC. Explanatory factors include the sectoral composition of growth and weaknesses in implementation of redistributive policies.
    Keywords: DRC; Congo; economic growth; poverty reduction
    Date: 2013–07
  13. By: Fontoura, Maria P.; Crespo, Nuno
    Abstract: Adopting a long term perspective, we evaluate the trade performance of less developed African countries. Besides some general trade indicators, we apply a constant market share analysis in order to decompose export performance into several components with specific economic interpretation. Our main conclusions are: (i) the sectoral specialization structure of exports has remained heavy in commodities but the composition of the basket of goods exported has changed considerably with a very strong concentration in crude oil (mainly in the last two decades), (ii) the geographical structure of exports has also changed, with an important increase of the relative importance of China and USA, (iii) the countries under analysis not only show a negative competitiveness effect, but are also penalized by their sectoral and geographical specialization, and (iv) the most favorable evolution is observed in the most recent sub-period (2000-2007), but it is insufficient to reverse the previous negative trend.
    Keywords: Constant market share analysis, Trade, Less developed African countries
    JEL: F14 O55
    Date: 2013
  14. By: Holger Görg; Adnan Seric
    Abstract: This paper uses firm level data for 19 African countries to look at the link between domestic firms’ business relationship with multinationals and their performance in terms of innovation and productivity. Quite uniquely, we also evaluate the importance of support received by the domestic firm, either from the government or the multinational business partner, for this link. Overall, our data analysis shows that for the average domestic firm, supplying to a foreign multinational in the country (the backward linkage) is positively associated with product innovation. Buying from a multinational (the forward linkage) is positively associated with labor productivity. These results are independent of any type of support from the government or multinationals. We also find that domestic firms’ process innovation activity is only positively associated with supplying a multinational if the firm also receives assistance from the government or multinational. Furthermore, we find that supplying a multinational is only positively associated with domestic firms’ productivity if the firm received technology transfer from the multinational customers
    Keywords: multinationals, technology transfer
    JEL: F23
    Date: 2013–08
  15. By: Kida, Mizuho
    Abstract: This paper analyzes Burundi's medium-term fiscal sustainability in the light of the country's vulnerability to various shocks. Earlier studies have highlighted the country's vulnerability to exogenous shocks related to commodity exports, rain-fed agriculture, and volatile foreign aid. Internally, uncertainty about the implementation of the government's fiscal reforms is a key risk. The earlier studies, however, did not quantify the size and impact of the risks on the country's fiscal sustainability. Drawing initially on the standard inter-temporal sustainability framework, the baseline analysis shows that Burundi's ongoing fiscal policy strategy is not sustainable, even with a gradually improving external environment and relatively strong growth. Stochastic simulations show that adverse shocks to rainfall or coffee prices could increase the country's debt-to-gross domestic product ratio by 5 to 7 percentage points above the projected baseline ratio. Aid shocks could have an even larger impact but the estimates are less statistically reliable because of the short time series and because historical volatility in part reflects endogenous shocks (such as reform implementation) as well as exogenous shocks (donors'behavior). The policy scenario analysis shows that future fiscal sustainability will hinge on the government's ability to stick to its plans to broaden the tax base, streamline generous tax incentives and exemptions, and control civil service wages and short-run expenditure pressures -- risks that need to be monitored closely over the political cycle in the country.
    Keywords: Debt Markets,Public Sector Expenditure Policy,Economic Theory&Research,Access to Finance,Public Sector Economics
    Date: 2013–08–01

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