nep-afr New Economics Papers
on Africa
Issue of 2013‒10‒25
fifteen papers chosen by
Quentin Wodon
World Bank

  1. Climate, ecosystem resilience and the slave trade By Fenske, James; Kala, Namrata
  2. Shadow economy and tax revenue in Africa By Kodila-Tedika, Oasis; Mutascu, Mihai
  3. Importing, Exporting and the Productivity of Services Firms in Sub-Saharan Africa By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  4. Declining economy in Zambia and its impact in food security By Mohajan, Haradhan
  5. Estimating the impact of language of instruction in South African primary schools: A fixed effects approach By Stephen Taylor; Marisa Coetzee
  6. Does risk matter for occupational choices? Experimental evidence from an African labour market By Paolo Falco
  7. Tribe or title? Ethnic enclaves and the demand for formal land tenure in a Tanzanian slum By Matthew Collin
  8. Foreign Ownership and Labour Markets in Sub-Saharan African Firms By Neil Foster-McGregor; Anders Isaksson; Florian Kaulich
  11. Price vs. weather shock hedging for cash crops: ex ante evaluation for cotton producers in Cameroon By Antoine Leblois; Philippe Quirion; Benjamin Sultan
  13. From emerging economies toward the Emerging Triad By Hermann Sebastian Dehnen; Jan H. van Dinther; Norbert Koubek
  14. Strengthening Child Protection Systems for Unaccompanied Migrant Children in Mozambique: A case study of the border town of Ressano Garcia By Andrea Verdasco; UNICEF Innocenti Research Centre
  15. Perverse supply response in the Liberian mining sector By Grahamm Errol G.

  1. By: Fenske, James; Kala, Namrata
    Abstract: African societies exported more slaves in colder years. Lower temperatures reduced mortality and raised agricultural yields, lowering slave supply costs. Our results help explain African participation in the slave trade, which predicts adverse outcomes today. We use an annual panel of African temperatures and port-level slave exports to show that exports declined when local temperatures were warmer than normal. This result is strongest where African ecosystems are least resilient to climate change. Cold weather shocks at the peak of the slave trade predict lower economic activity today. We support our interpretation using the histories of Whydah, Benguela, and Mozambique.
    Keywords: Africa, climate change, slave trade, temperature
    JEL: N57 O10 Q54
    Date: 2013–10
  2. By: Kodila-Tedika, Oasis; Mutascu, Mihai
    Abstract: The paper explores the effects of shadow economy on tax revenues, in the case of several African countries, based on a panel-model approach. The data-set covers the period 1999-2007. The main results reveal that the shadow economy has a significant and negative impact on tax revenues. In other word, when the shadow economy tends to extend, the level of tax revenues decreases. These outputs show that the African governments, in order to maximise the collected tax revenues, should better “control” the shadow economy phenomenon.
    Keywords: Shadow economy, Tax revenues, Effects, Implications, Africa
    JEL: H11 H20 H26
    Date: 2013
  3. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: Abstract In this paper we examine productivity differences between trading and non-trading firms in the services sector using recently collected data on a sample of 19 sub-Saharan African firms. A variety of parametric and non-parametric tests are implemented in order to examine whether exporters, importers and two-way traders perform better than non-traders, and whether there are differences in performance between different types of trading firms. Our results indicate that services firms that are engaged in international trade perform significantly better than those firms that trade on the domestic market only. Two-way traders and exporters only are found to perform better than importers only, with no significant difference in performance found between two-way traders and exporters only. We further present evidence indicating that there is no significant difference in performance between export starters and export continuers, a result consistent with the self-selection hypothesis for African services firms.
    Keywords: productivity, imports, exports, services firms
    JEL: D24 F10 L10
    Date: 2013–03
  4. By: Mohajan, Haradhan
    Abstract: Zambia is a landlocked country located in southern central Africa and it is one of the poorest countries in the world and is considered a least developed country. Malnutrition is a chronic and difficult problem in this country. Agriculture is the main occupation and maize is the staple food. About 90% farmers of the country are smallholders, dependent on rain fed agriculture. After independence it was rich in food and could export maize but since 2002 it has to import maize every year. Literacy rate is low and women are less literate than men. HIV/AIDS, tuberculosis and malaria are fatal diseases in Zambia and mortality rates are among the highest in the world. The rural transportation network is largely undeveloped and communication costs are very high; foreign direct investment is also very low. The main export of the country is copper. According to the Food and Agriculture Organization, 49% of the Zambian population is undernourished and unable to access minimum energy requirement.
    Keywords: Copper, economy, food aid, food security, poverty, Zambia.
    JEL: Q18
    Date: 2013–02–12
  5. By: Stephen Taylor (Department of Basic Education); Marisa Coetzee (Departement Ekonomie, Universiteit van Stellenbosch)
    Abstract: For many children around the world, access to higher education and the labour market depends on becoming fluent in a second language. This presents a challenge to education policy: when and how in the school programme should a transition to the second language occur? While a large theoretical literature exists, empirical evidence is limited by the difficulties inherent to measuring the causal effect of language of instruction. In South Africa, the majority of children do not speak English as their first language but are required to undertake their final school-leaving examinations in English. Most schools offer mother-tongue instruction in the first three grades of school and then transition to English as the language of instruction in the fourth grade. Some schools use English as the language of instruction from the first grade. In recent years a number of schools have changed their policy, thus creating within-school, cross-grade variation in the language of instruction received in the early grades. We use longitudinal data on school characteristics including language of instruction by grade, and student test score data for the population of South African primary schools. Simple OLS estimates suggest a positive correlation between English instruction in the first three grades and English performance in grades 4, 5 and 6. After including school fixed effects, which removes the confounding effects of selection into schools with different language policies, we find that mother tongue instruction in the early grades significantly improves English acquisition, as measured in grades 4, 5 and 6. The significance of this study is twofold. Firstly, it illustrates the power of school-fixed effects to estimate causal impacts of educational interventions. Secondly, it is the first South African study (and one of a very few international studies) to bring robust empirical evidence to the policy debate around language of instruction.
    Keywords: Education, language of learning and teaching, South Africa, fixed effects
    JEL: I24 I25 I28
    Date: 2013
  6. By: Paolo Falco
    Abstract: This paper investigates the role of risk-aversion in the allocation of workers between formal and informal jobs in Ghana. In the model I propose risk-averse workers can opt between the free-entry informal sector and queuing for formal occupations. Conditional on identifying the riskier option, the model yields testable implications on the relationship between risk-preferences and workers’ allocation. My testing strategy proceeds in two steps. First, I estimate expected income uncertainty through panel data and find it significantly higher in the informal sector. Second, using novel experimental data to elicit individual attitudes to risk, I estimate the direct effect of risk-aversion on occupational choices and find that, in line with the first result, more risk-averse workers are more likely to queue for formal jobs and less likely to be in the informal sector. The results bear important implications for the optimal design of employment policies and social security.
    Keywords: sector allocation; occupational choices; risk-aversion; informality
    JEL: C93 J21 J24 J64 O17
    Date: 2013
  7. By: Matthew Collin
    Abstract: This paper examines the relationship between ethnic heterogeneity and the demand for formal land tenure in urban Tanzania. Using a unique census of two highly-fractionalized unplanned settlements in Dar es Salaam, I show that households located near coethnics are significantly less likely to purchase a limited form of land tenure recently offered by the government. I attempt to address one of the chief concerns - endogenous sorting of households - by conditioning on a household’s choice of coethnics neighbors upon arrival in the neighborhood. I also find that coethnic residence predicts lower levels of perceived expropriation risk, but not perceived access to credit nor contribution to local public goods. These results suggest that close-knit ethnic groups may be less likely to accept state-provided goods due to their ability to generate reasonable substitutes, in this case protection from expropriation. The results are robust to different definitions of coethnicity and spatial cut-offs, controls for family ties and religious similarity as well as spatial fixed effects. Finally, the main result is confirmed using a large-scale administrative data-set covering over 20,000 land parcels in the city, exploiting ethnically-unique last names to predict tribal affiliation.
    Keywords: Ethnicity, Land tenure, Tanzania, Unplanned settlements
    JEL: J15 Q15 R23
    Date: 2013
  8. By: Neil Foster-McGregor (The Vienna Institute for International Economic Studies, wiiw); Anders Isaksson; Florian Kaulich
    Abstract: Abstract In this paper we examine whether foreign-owned firms pay higher wages and have higher levels of employment than domestically-owned firms in a cross-section of sub-Saharan African (SSA) firms using data from 19 SSA countries. We also test for the presence of wage spillovers, examining whether the wages offered by foreign-owned firms in an industry impact upon the wages paid by domestically-owned firms. Our results indicate that foreign-owned firms tend to pay higher average wages, employ more workers and generate positive human capital effects. This tends to be true for total employment and average wages for all workers as well as for blue- and white-collar workers separately. The effects of foreign ownership tend to be stronger for white-collar workers when considering wages and for blue-collar workers when considering employment. Our results also suggest that the presence of foreign-owned firms does not significantly impact upon the wages paid by domestically-owned firms however.
    Keywords: foreign ownership, employment, wage premium
    JEL: J21 J31 F23
    Date: 2013–03
  9. By: Andrey Klevchuk (Cambridge Resources International Inc.); Glenn Jenkins (Queen's University, Canada and Eastern Mediterranean University, Cyprus; Queen's University, Kingston, Canada)
    Abstract: Over the past decade, South Africa has experienced a rising pace of economic and social development which has facilitated the expansion of the basic social programs, especially in health and education. The education sector has been given a high priority by the National and Provincial authorities in order to eradicate illiteracy and to step up the scope and standard of education in public schools. As such, capital appraisal of the potential projects carried out by the department is now the focus of increasing attention. As a part of the continuous effort by the Limpopo Provincial Government to improve the quality of public infrastructure delivery by its departments, this handbook focuses on the process of capital project selection by the Department of Education (DOE). The objective of this handbook is to assist the decision-makers at the DOE in the selection of capital projects for construction and for rehabilitation, using a ranking system being developed as an extension of cost-effectiveness and cost-utility analysis. The handbook shows that the overall effectiveness of budget spending can be maximized when the funds are allocated for school construction and/or rehabilitation according to a priority index.
    Keywords: education, cost-effectiveness analysis, school construction and rehabilitation, priority index, budget allocation, South Africa
    JEL: D61 H43 H52 H75 I28
  10. By: Andrey Klevchuk (Cambridge Resources International Inc.); Glenn Jenkins (Queen's University, Canada and Eastern Mediterranean University, Cyprus; Queen's University, Kingston, Canada)
    Abstract: It has been a challenge for the Limpopo Provincial Government to tackle the eradication of poverty and the acceleration of the pace of economic growth in the province. It is of importance for the Government to provide the basic infrastructure facilities such as roads, water, electricity, and telecommunication for not only the development of the region, but also the creation of a strong private sector. This handbook focuses on the process of capital appraisal by the Roads Agency Limpopo (RAL) so as to contribute to the Government in its continuous effort to improve the quality of public infrastructure delivery by its departments. The appraisal methodology employed in the handbook is based on an integrated financial, economic, stakeholder and risk analysis of new investment projects, as well as maintenance, and expansion decisions. The handbook presents that the Government officials can use the proposed methodology together with the Deighton Total Infrastructure Management System (dTIMS CTTM) software program for the allocation of the funds to the Limpopo roads, new and old, in an economically and socially efficient manner.
    Keywords: road construction and maintenance, cost-benefit analysis, South Africa
    JEL: D61 H43 H54 H76 R42
  11. By: Antoine Leblois (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Philippe Quirion (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Centre de coopération internationale en recherche agronomique pour le développement [CIRAD] : UMR56 - CNRS : UMR8568 - École des Hautes Études en Sciences Sociales [EHESS] - École des Ponts ParisTech (ENPC) - AgroParisTech); Benjamin Sultan (LOCEAN - Laboratoire d'Océanographie et du Climat : Expérimentations et Approches Numériques - Institut de recherche pour le développement [IRD] - INSU - CNRS : UMR7159 - Université Pierre et Marie Curie (UPMC) - Paris VI - Muséum National d'Histoire Naturelle (MNHN))
    Abstract: In the Sudano-sahelian zone, which includes Northern Cameroon, the inter-annual variability of the rainy season is high and irrigation is scarce. As a conse- quence, bad rainy seasons have a detrimental impact on crop yield. In this paper, we assess the risk mitigation capacity of weather index-based insurance for cotton farmers. We compare the ability of various indices, mainly based on daily rainfall, to increase the expected utility of a representative risk-averse farmer. We first give a tractable definition of basis risk and use it to show that weather index-based insurance is associated with a large basis risk. It has thus limited potential for income smoothing, whatever the index or the utility function. Second, in accordance with the existing agronomical literature we find that the length of the cotton growing cycle, in days, is the best performing index considered. Third, we show that using observed cotton sowing dates to define the length of the grow- ing cycle significantly decreases the basis risk, compared to using simulated sowing dates. Finally we found that the gain of the weather-index based insurance is lower than that of hedging against cotton price fluctuations which is provided by the national cotton company. This casts doubts on the strategy of international institutions, which support weather-index insurances in cash crop sectors while pushing to liberalisation without recommending any price stabilization schemes.
    Keywords: Agriculture, weather, index-based insurance.
    Date: 2013–03–04
  12. By: Fernando Cossio Munoz-Reyes (International Institution for Economics and Business, La Paz, Bolivia); Glenn Jenkins (Queen's University, Canada and Eastern Mediterranean University, Cyprus; Queen's University, Kingston, Canada)
    Abstract: Fragmentation and severe inequalities in health status, health infrastructure and services were among the major problems the Limpopo Provincial Government had to deal with when they took office in 1994. Hence, as part of an intensive program of legislative and policy development to reform the health sector, it is the Government’s priority to allocate scarce resources between building new health facilities and renovating, upgrading and/or revitalizing existing facilities. Given the main focus of Limpopo Province Department of Health and Welfare (DoHW) on improving the existing facilities in order to make a more effective use of them, the main allocation decision is how to select among the existing facilities and types of service improvements for the annual investment budgets. This Handbook describes a methodology of the evaluation of investment possibilities in order to help public officials in the Department to develop investment projects and health policy interventions that maximize economic and social well-being. The methodology outlined represents a state-of-the-art tool for conducting an integrated financial, economic, stakeholder and risk analysis of capital investments in hospitals, clinics and related policy interventions.
    Keywords: health infrastructure and policy, cost-benefit analysis, budget allocation, South Africa
    JEL: D61 H43 H51 H75
  13. By: Hermann Sebastian Dehnen (University of Wuppertal, Schumpeter School of Business and Economics); Jan H. van Dinther (University of Wuppertal, Schumpeter School of Business and Economics); Norbert Koubek (University of Wuppertal, Schumpeter School of Business and Economics)
    Abstract: In this article an entirely new structural approach called the ‘Emerging Triad’ is identified, which is dealing with the increasing regional, intra- and interregional integration of the emerging regions Latin America, Southeast Asia and sub-Saharan Africa. In this context the increasing south-south cooperation’s, specific transregional free trade agreements as well as foreign direct investments are identified as the main driver for this ongoing networking process. For a deeper analysis of this development the regional trading blocs Mercosur, SADC and ASEAN as well as specific countries are chosen. Due to their increasing industrialization a similar development like the one of the BRIC countries can be anticipated for these regions in the upcoming years. Apart from the industrialization, the increasing integration and interdependence of specific countries or even regions is going to be a relevant factor with respect to future market entry decisions of companies of the southern developing countries and a deeper market penetration of northern developed market multinational enterprises. As a consequence the growing relevance of these regions in the global trade and business due to its strong economical development will lead to an ongoing alignment process between the established northern Triad and the new identified emerging triad. This convergence became obvious especially during the global crisis in 2009 and 2010. Finally the new approach of the Emerging Triad and the northern triad with its developed nations are included into a double helix structure which stands for the increasing tradeoff between the industrialized world and the emerging world.
    Keywords: Emerging triad, emerging markets, emerging market economies, BRIC, double helix structure, base of the pyramid, south-south cooperation, regional integration, Triad, FDI, trade
    Date: 2013–10
  14. By: Andrea Verdasco; UNICEF Innocenti Research Centre
    Abstract: This research sets out to understand the why, how and with whom of rural-urban internal migration of children to the Mozambique border town of Ressano Garcia. In doing so, it aims to address the overarching research question of how to strengthen child protection systems for unaccompanied migrant children. Research took place at the border town of Ressano Garcia and in the Mozambican capital city of Maputo, between July and September 2012. Following a thorough analysis of the qualitative data, engaging with the current debate on migration and child protection issues, this paper critically assesses the current interconnected ‘protective actors’ and protection mechanisms and provides recommendations. Under a qualitative child participatory approach, children and their views are placed at the centre of the research. Research participants also include protective actors that are the cornerstone of child protection mechanisms, including: civil society organizations (CSOs) in both Ressano Garcia and Maputo, and government officials at local, district, provincial and central level, thus allowing for a triangulation of sources.
    Keywords: child labour; child protection; migrant children; migration policy; mozambique; social policy;
    JEL: I3
    Date: 2013
  15. By: Grahamm Errol G.
    Abstract: Under neoclassical assumptions, and the usual ceteris paribus stipulations, a profit maximizing firm is expected to increase production in response to rising prices. These situations normally produce the rather well-known upward sloping supply curve for the firm which can usually be generalized to the industry. This paper examines whether these situations held for firms in the iron ore mining sector in Liberia between 1951 and 1985 under a system where royalties were levied on the per unit level of production and on the basis of the price of the ore. It investigates whether iron ore mining companies have an incentive to increase ore production when prices are low to attract lower total royalty payments under conditions where: (a) base-mining operations are vertically integrated and firms employ transfer pricing between mining and upstream processing entities and (b) large quantities of ore can be shipped at relatively low prices and held in inventory either as ore or added-value products, such as steel, to take advantage of higher prices in the future. The paper specifies and estimates two simple linear supply models of the Liberian iron ore industry. It uses data for 1951-1985, the period for which the most consistent and reliable data exist prior to the start of the 14-year conflict in 1989. The analysis finds that the price coefficient estimates from both models are robust but negative and suggest that a perverse response in the supply behavior of mining companies in Liberia over the period 1951-1985 cannot be ruled out.
    Keywords: Markets and Market Access,Economic Theory&Research,Mining&Extractive Industry (Non-Energy),Water and Industry,Labor Policies
    Date: 2013–10–01

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