nep-afr New Economics Papers
on Africa
Issue of 2013‒12‒15
twenty-two papers chosen by
Quentin Wodon
World Bank

  1. Philanthropy in Africa and the future of EU’s development policies: useful synergies? By Damien Helly
  2. Rethinking Pro-Growth Monetary Policy in Africa: Monetarist versus Keynesian Approach By NGUENA, CHRISTIAN LAMBERT
  3. Assessing Fiscal Capacity at the Local Government Level in South Africa By Margaret Chitiga-Mabugu; Nara Monkam
  4. An Inquisition into Bivariate Threshold Effects in The Inflation-Growth Correlation: Evaluating South Africa’s Macroeconomic Objectives By Phiri, Andrew
  5. Multilateral Institutions and African Economic Integration By Bernard M. Hoekman
  6. A demographic dividend for Sub-Saharan Africa: Source, Magnitude, and Realization By David E. Bloom; Salal Humair; Larry Rosenberg; JP Sevilla; James Trussell
  7. Mineral Mining and Female Employment By Andreas Kotsadam; Anja Tolonen
  8. Relative Standing and Life-Satisfaction: Does Unobserved Heterogeneity Matter? By Alem, Yonas
  9. Child Labor, Idiosyncratic Shocks, and Social Policy By Alice Fabre; Stéphane Pallage
  10. Interplay of Land Governance and Large-Scale Agricultural Investment: Evidence from Ghana and Kenya By Kerstin Nolte; Susanne Vaeth
  11. The Economic Costs of Unsupplied Electricity: Evidence from Backup Generation among African Firms By Musiliu O. Oseni; Michael G. Pollitt
  12. Exchange Rate Volatility and Inflation Upturn in Nigeria: Testing for Vector Error Correction Model By Adeniji, Sesan
  13. Migrants' Home Town Associations and Local Development. Evidence from Mali By Lisa Chauvet; Flore Gubert; Marion Mercier; Sandrine Mesplé-Somps
  14. Do countries falsify economic data strategically? Some evidence that they might. By Tomasz Michalski; Gilles Stoltz
  15. Inflation and Economic Growth in Zambia: A Threshold Autoregressive (TAR) Econometric Approach By Phiri, Andrew
  16. Measuring Maize Price Volatility in Swaziland using ARCH/GARCH approach By Sukati, Mphumuzi
  17. Optimal Expectations and the Welfare Cost of Climate Variability By Alem, Yonas; Colmer, Jonathan
  18. Households Expenditure Pattern On Beef And Chicken Of Selected Households In Akoko South-West LGA Of Ondo State By Alimi, Santos R.
  19. Inputs, Gender Roles or Sharing Norms? Assessing the Gender Performance Gap Among Informal Entrepreneurs in Madagascar By Vaillant, Julia; Nordman, Christophe Jalil
  20. Collective Action, Heterogeneous Loyalties, and Path Dependence: Micro-Evidence from Senegal By Jean-Philippe Platteau; Tomasz Strzalecki
  21. After the Drought: The Impact of Microinsurance on Consumption Smoothing and Asset Protection By Sarah A. Janzen; Michael R. Carter
  22. Local Economic Conditions and Participation in the Rwandan Genocide By Willa Friedman

  1. By: Damien Helly
    Abstract: Three archetypical forms of philanthropy in a rapidly transforming Africa should be distinguished: foreign philanthropies operating in Africa, Africa-born philanthropy on the model of Western organisations and numerous African redistribution practices expressing a variety of societal features of giving. This diversity will most probably play a substantial role in reshaping development policies, debates and concepts on the continent in the years to come.The question therefore is to what extent will philanthropy be a game changer in European development policies in Africa. In that respect, it could be useful for development-policy makers in the EU to 1) monitor and understand current trends in the philanthropic community in Africa in the view to 2) identifying areas of common interest and action.
    Keywords: philanthropy, Africa, EU, development
    Date: 2013–12
    Abstract: The relative positive economic growth experienced by most African countries in the recent decade has come with insufficient demand stimulation. The concern of poverty at the forefront of economic policy, the need for inclusive growth and sustainable development, inter alia, brings forward the inevitable question of the monetary policy responsibility. Accordingly, the monetarist theory that focuses on price stability inherently neglects the demand stimulation aspect of economic prosperity. Since the mid 1980s, the monetarist school driven by its central aim of fighting inflation and maintaining credibility in markets and economic agents has been priority for monetary authorities (especially in Africa). To this effect, while good results in terms of inflation targeting has been achieved in many African countries; economic growth has sometimes been low. Hence, in light of the above, using a statistical and theoretical debate method, the Credible Monetary Policy (CMP) paradox is traceable to Africa. Accordingly, with the promising economic environment in Africa, we recommend the promotion of a monetary policy oriented toward improving economic growth under the constraint of price stability. In light of the above view, there are some note worthy signs such the recent decision by the two CFA zone central banks to either maintain interest rates at a low level or reduce it despite tightening measures of monetary policy taken by the European Central Bank (ECB) earlier in the year. In the same vein, the central bank of South Africa has maintained its policy of low interest rates with an objective of economic expansion. Since, the 2008 financial crisis, the consolidation of the Federal Reserve’s declared final objective of lowering interest rates and making emergency loans is an eloquent example to reassure African central banks in the choice of the pro-growth monetary policy option.
    Keywords: Pro growth monetary policy; CMP paradox; Financing enterprises; African central bank.
    JEL: B40 E52
    Date: 2010–12–08
  3. By: Margaret Chitiga-Mabugu (Human Sciences Research Council, Pretoria, South Africa); Nara Monkam (Department of Economics, University of Pretoria)
    Abstract: In recent years, local governments in South Africa have faced daunting challenges, notably significant service delivery backlogs, poor financial management, corruption, and poor capacity due to lack of skills. As a result, numerous municipalities are deemed to be in financial distress, and already questions have been raised concerning their capability to efficiently deliver on expected outcomes on a sustainable basis and to cope with economic shocks. In this context, South Africa has embarked upon a comprehensive review of the local government equitable share (LES) formula which constitutes the main unconditional grant that accrues to municipalities. The objective of this paper is to assess fiscal disparities across municipalities using a comprehensive approach to measuring fiscal capacity. In assessing the overall level of fiscal capacity, the paper uses the Representative Revenue System (RRS) and the Representative Expenditure System (RES) methodologies. To the best of our knowledge, such comprehensive measures of fiscal capacity at the municipal level have yet to be applied in the South African context. Additionally, the contribution of this paper lies mainly in that it provides a more systematic measure of municipal fiscal capacity that should be taken into account in the revision and improvement of the current LES formula to ensure that the LES funds are equitably distributed. Furthermore, an appropriate measure of fiscal capacities across municipalities in South Africa will provide the Municipal Demarcation Board with a tool to re-determine municipal boundaries based on objective and empirical evidence rather than political considerations.
    Keywords: Fiscal capacity, Revenue capacity, Expenditure need, Revenue effort, RRS, RES
    JEL: H11 H20 H71 H72 H77
    Date: 2013–11
  4. By: Phiri, Andrew
    Abstract: Is the SARB’s inflation target of 3-6% compatible with the 6% economic growth objective set by ASGISA? Estimations of inflation-growth bivariate Threshold Vector Autoregressive with corresponding bivariate Threshold Vector Error Correction (BTVEC-BTVAR) econometric models for sub-periods coupled with the South African inflation-growth experience between 1960 and 2010; suggest on optimal inflation-growth combinations for South African data presenting a two-fold proposition. Firstly, for the performance of economic growth to improve so it coincides with the 6% target objective as defined by ASGISA, may require the sustainment of an inflation rate of below 3.08%. Secondly, given the current economic environment with inflation averages of above 3.08% and economic growth rates of below 5.58%, lower inflation rates are to be best pursued through the attainment of higher economic growth rates. Consequentially, the overall implication of the study offers support in favour of a lower, ‘close-to-zero’ inflation target as a means of ensuring improved macroeconomic performance within the economy, while simultaneously contending that it would prove beneficial for stabilization economic policies to be devised such that these low levels of inflation are attained through higher economic growth rates.
    Keywords: Macroeconomic Policy; Economic Growth; Inflation; Thresholds, South Africa
    JEL: C22 C3 E60
    Date: 2013–12–09
  5. By: Bernard M. Hoekman
    Abstract: A matter of long-standing policy concern is the limited extent to which many countries in Africa have been able to diversify their economies. The global phenomenon of supply chain trade in principle generates opportunities for specialization in processing activities and labour- or natural-resource intensive tasks that are part of international value chains. This paper discusses what role international organizations – in particular the global trade body, the WTO, and the multilateral financial institutions – have played in assisting efforts to enhance the ability of firms in Africa to participate in value chains by lowering trade costs, suggests some implications for trade governance at both the national and global level.
    Keywords: African economic integration, supply chains, international organizations, development assistance, trade costs
    Date: 2013–10
  6. By: David E. Bloom (Harvard School of Public Health); Salal Humair (Harvard School of Public Health); Larry Rosenberg (Harvard School of Public Health); JP Sevilla (George Mason School of Law); James Trussell (Office of Population Research, Princeton University and the Hull York Medical School)
    Abstract: The demographic dividend – the one-time economic bonus that can arise, if conditions are right, from a decline in fertility rates – could matter a lot for Sub-Saharan Africa. Rapid population growth will doubtless bring great challenges, but lower fertility rates could usher in a higher share of working-age people in the population and thus, potentially, enormous economic benefits for the region.
    Keywords: Labor studies, aging, health care
    Date: 2013–12
  7. By: Andreas Kotsadam; Anja Tolonen
    Abstract: We use the rapid expansion of the number of mineral mines in Sub- Saharan Africa to explore changes in local labor markets. Matching over two decades of panel data on industrial mines to survey data for half a million women and exploiting the spatial and temporal variation in the data in a difference-in-difference strategy, we find that opening of an industrial mine induces a structural shift whereby women switch from working in agriculture to services. We also find that the probability to earn cash income increases and women become less likely to work seasonally once a mine opens nearby. The results illustrate that mineral mining creates non-agricultural employment opportunities for women despite their absence from the mining workforce. The spillover effects wear off with distance from mine and the effects on service employment are reversed when a mine closes.
    JEL: J16 J21 O13 O18
    Date: 2013–05–30
  8. By: Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Unlike most studies of subjective well-being in developing countries, we use a fixed effects regression on three rounds of rich panel data to investigate the impact of relative standing on life satisfaction of respondents in urban Ethiopia. We find a consistently large negative impact of relative standing - both relative to others and to oneself over time - on subjective well-being. However, controlling for unobserved heterogeneity through a fixed effects model reduces the impact of the relative standing variables on subjective well-being by up to 24 percent and reduces the impact of economic status by about 40 percent. Our findings highlight the need to be cautious in interpreting parameter estimates from subjective well-being regressions based on cross-sectional data, as the impact of variables may not be disentangled from that of unobserved heterogeneity.
    Keywords: life satisfaction; urban Ethiopia; relative standing; fixed effects
    JEL: I30 I31 O12
    Date: 2013–12–10
  9. By: Alice Fabre (AMSE - Aix-Marseille School of Economics - Aix-Marseille Univ. - Centre national de la recherche scientifique (CNRS) - École des Hautes Études en Sciences Sociales [EHESS] - Ecole Centrale Marseille (ECM)); Stéphane Pallage (CIRPEE and Département des Sciences Economiques - Université du Québec à Montréal)
    Abstract: In this paper, we provide a dynamic model with heterogeneous agents to study child labor in an economy with idiosyncratic shocks to employment. Households facing adverse shocks may use child labor as a buffer to smooth consumption. We show that the introduction of an unemployment insurance program and/or a universal basic income system help eliminate child labor endogenously in this context. A calibration to South Africa in the 1990s is provided.
    Keywords: child labor; idiosyncratic shocks; unemployment insurance; universal basic income; heterogeneous agents; child labor ban
    Date: 2013–11
  10. By: Kerstin Nolte (GIGA German Institute of Global and Area Studies); Susanne Vaeth (University of Marburg)
    Abstract: Recognising the increased demand for agricultural land, this comparative analysis examines the effect of large-scale land acquisitions on their surrounding institutional environment. An embedded case study design allows us to analyse two specific land deals in Ghana and Kenya. We find that insufficiencies in these countries’ land governance systems are partly caused by discrepancies between de jure and de facto procedures; and that weak legal frameworks, coupled with poor enforcement, produce outcomes that depend to a large extent on the investors. We also find that large-scale land acquisitions have a feedback effect on the land governance system, which suggests that large-scale land acquisitions can be drivers of institutional change.
    Date: 2013
  11. By: Musiliu O. Oseni; Michael G. Pollitt
    Abstract: Public electricity provision in Africa has been marred by under investment and frequent power outages. One of the strategies often adopted by firms to cope with this poor public supply is investment in backup generation. This strategy is not without cost however. Extant literatures on outage cost estimation have shown that firms possessing certain characteristics have a higher tendency to invest in backup generation. What is less known, however, is whether those firms suffer lesser or higher unmitigated outage losses (costs). Using cross-sectional data from 6854 firms currently operating in 12 African countries, this study investigated the extent to which firms’ characteristics might create incentives for auto-generation and whether these incentives lead to lesser unmitigated outage costs. We used three different methods including marginal cost, incomplete backup and subjective evaluation techniques. The results reveal that large firms, firms engaging in exports, and those using the Internet for their operation still suffer higher unmitigated outage costs despite having a higher propensity of investing in backup generation. The results further reveal that unmitigated costs still account for the larger proportion of the total outage costs despite high prevalence of backup ownership among the firms. This reflects the inefficiency in backup generation due to small backup capacity held by firms. Our estimates also indicate that ignoring firms’ characteristics such as size and the nature of operation (e.g. export promotion, internet usage, etc.) may result in underestimation of outage losses. The analysis further suggests that firms can still benefit significantly even when the current subsidised tariffs are replaced by cost-reflective rates that ensure stable electricity supply. The net outage cost (having adjusted for a cost-reflective tariff) incurred by firms are large enough to expand their scope of operation and hire more workers, suggesting the macroeconomic effect could be significant.
    Keywords: Africa, Backup, Electricity, Firms, Outage costs, Two-Limit Tobit
    JEL: L6 L81 L94 N77 Q4
    Date: 2013–04–12
  12. By: Adeniji, Sesan
    Abstract: Abstract This paper empirically examines the impact of exchange rate volatility on inflation in Nigeria using annual time series data from 1986 – 2012. The methodology employed includes: ADF, PP and KPSS test of unit root, Johansen Julius cointegration test, VECM, granger causality test, impulse response function and variance decomposition. The unit root test result shows that all variables are stationary at first difference, while Maxi-eigen value shows a long run relationship between the variables. VECM result established positive and significant relationship between inflation, exchange rate volatility, money supply and fiscal deficit, while gross domestic product show negative relationship. Granger causality outcome shows a bi-directional relationship between all the variables. Subsequently, exchange rate volatility is deduced to influence inflation in Nigeria. Therefore, it becomes imperative for the government to understand and control the various channels through which exchange rate transmits to affect inflation in Nigeria, check the growth of money supply, increase the level of productivity in the country and lastly cut down public sector expenditure and possibly make a shift from excessive consumption expenditure to capital expenditure believing this will reduce the burden of fiscal deficit and the rate of inflation.
    Keywords: Exchange rate volatility, inflation upturn, vecm, granger causality, impulse response and variance decomposition
    JEL: E31 E51 E62
    Date: 2013–12–08
  13. By: Lisa Chauvet (IRD, UMR DIAL, PSL, Université Paris-Dauphine); Flore Gubert (IRD, UMR DIAL, PSL, Université Paris-Dauphine); Marion Mercier (IRD, UMR DIAL, Paris School of Economics); Sandrine Mesplé-Somps (IRD, UMR DIAL, PSL, Université Paris-Dauphine)
    Abstract: This paper explores the impact of Malian migrants' Home Town Associations (HTAs) located in France on the provision of local public goods in Mali. To this end, we compute an original dataset on all the HTAs that have been created by Malian migrants in France since 1981 and geo-localize their interventions on the Malian territory. Thanks to four waves of Malian census, we also build a panel dataset on the provision of a range of public goods in all Malian villages over the 1976-2009 period. These two sources of data allow us to implement a difference-in-differences strategy, and to compare villages with and without an HTA, before and after HTAs developed their activity in Mali. We find that Malian HTAs have significantly contributed to improve the provision of schools, health centers and water amenities over the 1987-2009 period. When looking at the timing of the treatment, we observe that the difference between treated and control villages in terms of water amenities is mainly driven by the second period of observation (1998-2009), while schools and health centers exhibit significant differences during the whole period.________________________________ Nous analysons l’impact des associations de migrants (AM) de Maliens vivant en France sur la disponibilité en biens publics au Mali. Pour ce faire, nous avons constitué une base originale de données qui recense l’ensemble des AM maliennes enregistrées au Journal Officiel français depuis 1981 et qui géo-référence leurs lieux d’intervention. Cette base est couplée avec quatre recensements exhaustifs qui permettent de connaître la disponibilité en biens publics de chaque village malien de 1976 à 2009. En mettant en oeuvre une estimation en double différences, nous montrons que les AM maliennes ont significativement contribué à l’augmentation du nombre d’écoles, de centres de santé et d’adduction d’eau sur la période 1987-2009. Plus précisément, on observe que la différence entre le groupe de villages traités et le groupe de contrôle concernant l’adduction en eau est dû à des investissements menés durant la seconde période (1998-2009) tandis que les financements des AM concernant les écoles et les centres de santé ont eu lieu tout au long de la période 1987-2009.
    Keywords: Local public goods, Migration, Mali, biens publics locaux.
    JEL: F22 H41 H75 O55
    Date: 2013–11
  14. By: Tomasz Michalski (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959); Gilles Stoltz (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - GROUPE HEC - CNRS : UMR2959, DMA - Département de Mathématiques et Applications - CNRS : UMR8553 - École normale supérieure [ENS] - Paris, INRIA Paris - Rocquencourt - CLASSIC - École normale supérieure [ENS] - Paris - INRIA)
    Abstract: Using Benford's Law, we find evidence supporting the hypothesis that countries at times misreport their economic data strategically. We group countries with similar economic conditions and find that for countries with fixed exchange rate regimes, high negative net foreign asset positions, negative current account balances or more vulnerable to capital flow reversals we reject the first-digit law for the balance of payments data. This corroborates the intuition of a simple economic model. The main results do not seem to be driven by countries in Sub-Saharan Africa or those with low institutional quality ratings.
    Keywords: capital flows; public information provision; misinformation; Benford's Law; transparency
    Date: 2013–05–01
  15. By: Phiri, Andrew
    Abstract: This study examines threshold effects of inflation on economic growth for the Zambian economy using quarterly data collected between 1998 and 2011. This objective is tackled through the use of a threshold autoregressive (TAR) model and the conditional least squares (CLS) estimation technique. As a by-product of utilizing this estimation technique, the paper is able to identify whether there could be an optimal inflation level at which the adverse effects of inflation on economic growth are subdued, or similarly, a level of inflation at which the positive effects of inflation on economic growth are maximized. In this respect, the paper estimates an inflation threshold level of 22.5% for the observed data. These results indicate that economic growth in Zambia can be stimulated even in a moderately high inflation environment. Particularly, the causality analysis identifies the credit sector and exchange rate developments as being crucial channels towards ensuring enhanced economic performance in the Zambian economy.
    Keywords: Inflation; Economic Growth; Granger Causality; TAR Models; Zambia
    JEL: C22 E31 E58
    Date: 2013–12–09
  16. By: Sukati, Mphumuzi
    Abstract: This paper investigates maize price volatility in Swaziland as offered by NMC, an organization with a mandate of stabilizing prices in the country. Price volatility is analyzed using ARCH/GARCH modeling techniques. Results show that the organization has not been able to stabilize prices in the past years. This is likely because of exogenous global shocks in maize prices which are transmitted to the local market. These external shocks transmission are mainly because the organization imports a lot of maize to meet local demand. However, although prices have been volatile, the organization has been able to control persistence in volatility. Asymmetric analysis of the prices shows that prices have not reacted unequally to shock increase or decrease in prices. However, increase in maize prices has been seen as fueling volatility, which does not bode well for consumers. This analysis therefore has formed an important contribution to analysis of storage facilities and their role in stabilizing prices. Storage facilities will become important especially for third world countries with increased unpredictability in agricultural production due to climate change.
    Keywords: NMC, Maize Prices, Volatility, ARCH/GARCH, Persistence, Climate Change, Storage Facilities
    JEL: A1 A12 O1 O13 Q1 Q18
    Date: 2013–12–02
  17. By: Alem, Yonas (Department of Economics, School of Business, Economics and Law, Göteborg University); Colmer, Jonathan (the Grantham Research Institute and Dept of Geography and Environment, London School of Economics, UK)
    Abstract: Uncertainty about the future is an important determinant of well-being,especially in developing countries where financial markets and other market failures result in ineffective insurance mechanisms. However, separating the effects of future uncertainty from realised events, and then measuring its impact on utility presents a number of empirical challenges. This paper addresses these issues and shows that increased climate variability (a proxy for future income uncertainty) reduces farmers’ subjective well-being, consistent with the theory of optimal expectations (Brunnermeier & Parker, 2005), using panel data from rural Ethiopia and a new data set containing daily atmospheric parameters. The magnitude of our result indicates that a one standard deviation (7%) increase in climate variability has an equivalent effect on life satisfaction to a two standard deviation (1-2%) decrease in consumption. This effect is one of the largest determinants of life satisfaction in rural Ethiopia.
    Keywords: climate variability; uncertainty; subjective well-being; fixed effects
    JEL: C25 D60 I31
    Date: 2013–12–10
  18. By: Alimi, Santos R.
    Abstract: This study examined the expenditure pattern of beef and chicken by individual households in Akoko South-West of Ondo State. The study was designed to estimate the monthly expenditure on beef and chicken; evaluate the influence of household income and household size on expenditure as well as determine other factors which influence the monthly consumption of these meat products by households in the study area. Three Hundred household heads were selected from the area using the simple random sampling technique. Questionnaires were the main tool for data collection. Data collected were analyzed using descriptive statistics and regression analysis. The result showed that the average age of the consumers was 33.57 years; their mean household size was about 6 persons, while their average monthly income was about N48,000. 53% of the respondents were women and greater proportion (over 90%) of the consumers had secondary education and tertiary education. The study showed on the average, household monthly consumption of beef and fish were 1.9kg and 2.38kg respectively. This implies that the volume of the products consumed by households differ significantly. Chicken is consumed more than beef in the study area. This could be as a result of the price differential between the products for chicken is cheaper than beef in the area. The proportion of household’s total expenditure that went into beef/chicken consumption on average is 10.06% and about 4.21% of household’s income is expended on beef/chicken. The study found that the most important factor considered by households while purchasing beef and chicken was income after they have established their preference based on taste, nutritional value and prices.
    Keywords: Expenditure Pattern, Beef and Chicken Consumption, Households, Nigeria
    JEL: D1 D13 Q1 Q10
    Date: 2013–12–11
  19. By: Vaillant, Julia; Nordman, Christophe Jalil
    Abstract: We use a representative sample of informal entrepreneurs in Madagascar to add new evidence on the magnitude of the gender performance gap. After controlling for business and entrepreneur characteristics, female-owned businesses exhibit a value added 28 percent lower than their male counterparts. Correcting for endogenous selection into informal self-employment raises the gap by 5 percentage points. We then investigate the role of sharing norms and gender-differentiated allocation of time within the household in the gender performance gap, by estimating their effect on the technical inefficiency of female and male entrepreneurs. Only male entrepreneurs seem subject to pressure to redistribute from the distant network. Our findings are consistent with situations where women working at home would essentially feel negatively the burden of their own community due to intense social norms and obligations in their workplace but also of domestic chores and responsibilities. We find evidence of females self-selecting themselves into industries in which they can combine marketoriented and domestic activities.
    Keywords: Gender; entrepreneurship; informal sector; sharing norms; household composition; Madagascar;
    JEL: D13 D61 O12 J16
    Date: 2013–10
  20. By: Jean-Philippe Platteau; Tomasz Strzalecki
    Abstract: In Senegal we encountered a situation in which a minority group of migrant fishermen had completely different sets of expectations regarding a collective action depending on the location where they operated. In one village expectations were pessimistic, while in the other village they were optimistic. Understanding this contrast and its implications provides the main justification for the paper. To be able to account for the contrast between the two areas, pessimistic expectations in the first area have to be traced back to a preceding conflict that could never be settled satisfactorily. A perverse path -dependent process had thus been set in motion that could not be changed by a simple act of will of a determined leadership. To demonstrate the links between expectations and actions that fit with the story told, we propose a simple model of collective action with asymmetric information.
  21. By: Sarah A. Janzen; Michael R. Carter
    Abstract: When natural disasters afflict poor communities that lack buoyant access to financial markets, households face the unsavory choice of reducing consumption in order to protect remaining assets, or selling assets at low prices in order to maintain consumption and nutrition. Both choices are costly and damage future economic potential. Formal insurance markets would seem to offer large private and social returns in these circumstances. This paper studies a drought-induced insurance payout from a pilot project in Kenya to determine whether insurance protects households from asset and consumption destabilization. Average treatment effect estimates show that insurance significantly reduces both kinds of costly coping. A closer examination using threshold estimation methods reveals that insurance has different impacts for different kinds of households. Households with larger asset bases--those shown to be most likely to sell assets in order to cope with a shock--are 64 percentage points less likely to do so when insured. Households with fewer assets--those most likely to decrease food intake as a coping strategy--are 43 percentage points less likely to do so with insurance. These results suggest that insurance can have a large impact on both the productivity of the current generation and the human capital of the next.
    JEL: G22 O12 O16
    Date: 2013–12
  22. By: Willa Friedman (Center For Global Development)
    Abstract: This paper uses new data on participation to examine how local economic conditions shaped within-country variation in willingness to participate in violent activities during the Rwandan genocide. It discusses and tests the predictions of three sets of theories about the causes of violence. The data provide strong evidence that higher rates of both unemployment and education among Hutu are associated with increased participation. I find no evidence that the employment or education of the Tutsi population reduce participation rates. I also find suggestive evidence of a positive association between violence and the interaction of Hutu unemployment and education both at the commune level and at the individual level. These results are consistent with theories of opportunity costs discouraging violence, and they provide additional evidence of a connection between education, unemployment, and violence.
    Date: 2013–12

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