nep-afr New Economics Papers
on Africa
Issue of 2014‒02‒02
38 papers chosen by
Quentin Wodon
World Bank

  1. 1807: Economic shocks, conflict and the slave trade By James Fenske; Namrata Kala
  2. A Review of Zambia’s Agricultural Input Subsidy Programs: Targeting, Impacts, and the Way Forward By Mason, Nicole M.; Jayne, T.S.; Mofya-Mukuka, Rhoda
  3. Is Democracy Eluding Sub-Saharan Africa? By Carolyn Chisadza; Manoel Bittencourt
  4. Education and Fertility: Panel Time-Series Evidence from Southern Africa By Manoel Bittencourt
  5. Differential Electricity Pricing and Energy Efficiency in South Africa By Marcel Kohler
  6. Inflation and Economic Growth: Evidence from the Southern African Development Countries By Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
  7. Transformation, Job Creation and Subsidies to Creative Industries: The Case of South Africa’s Film and Television Sector By Alan Collins and Jen Snowball
  8. Savings and economic growth: A historical analysis of the relationship between savings and economic growth in the Cape Colony economy, 1850 - 1909 By Grietjie Verhoef, Lorraine Greyling and John Mwamba
  9. The Effects of Teacher Strike Activity on Student Learning in South African Primary Schools By Gabrielle Wills
  10. Inflation and Economic Growth in the SADC: Some Panel Time-Series Evidence By Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
  11. Race, Gender and Growth of the Affluent Middle Class in Post-Apartheid South Africa By Justin Visagie
  12. Coping with risk : the effects of shocks on reproductive health and transactional sex in rural Tanzania By de Walque, Damien; Dow, William H.; Gong, Erick
  13. Measuring multi-membership in economic integration and its trade-impact. A comparative study of ECOWAS and SADC By Sylvanus Kwaku Afesorgbor; Peter A.G. van Bergeijk
  14. Debt sustainability and financial crises in South Africa By Leroi Raputsoane and Ruthira Naraidoo
  15. Estimating the impact on poverty of Ghana’s fuel subsidy reform and a mitigating response By Edgar F.A. Cooke; Sarah Hague; John Cockburn; Abdel-Rahmen El Lahga; Luca Tiberti
  16. Solar versus Combined Cycle Electricity Generation in Capital Constrained African Economies: Which is Greener? By Saule Baurzhan; Glenn P. Jenkins
  17. The Trans-Atlantic Slave Trade and Local Political Fragmentation in Africa By Nonso Obikili
  18. Tracking Under-Reported Financial Flows: China’s Development Finance and the Aid-Conflict Nexus Revisited By Strange, Austin M.; Parks , Bradley; Tierney, Michael J.; Fuchs, Andreas; Dreher , Axel
  19. Growth patterns of microfinance clients - Evidence from Sub-Saharan Africa By Winkler, Adalbert; Wagner, Charlotte
  20. Municipal assessments versus actual sales price information in hedonic price studies: A South African case study By M du Preez and MC Sale
  21. Modelling Stock Return Volatility Dynamics in Selected African Markets By Daniel King and Ferdi Botha
  22. Wage subsidies and youth employment in South Africa: Evidence from a randomised control trial By James Levinsohn; Neil Rankin; Gareth Roberts; Volker Schöer
  23. Do the Poor Benefit from Devolution Policies? Evidences from Quantile Treatment Effect Evaluation of Joint Forest Management By Dambala Gelo, Steven F. Koch and Edwin Muchapondwa
  24. Relative price variability: Which components of the consumer price index contribute towards its variability? By Eliphas Ndou and Siobhan Redford
  25. Colog asset pricing, evidence from emerging markets By Dranev Yury; Fomkina Sofya
  26. Early Life Circumstance and Mental Health in Ghana By Achyuta Adhvaryu; James Fenske; Anant Nyshadham
  27. High Hopes and Limited Successes: Experimenting with Industrial Polices in the Leather Industry in Ethiopia By Girum Abebe; Florian Schaefer
  28. Surviving the Genocide: The Impact of the Rwandan Genocide on Child Mortality By Federico Ciani; Gianna Claudia Giannelli
  29. Poverty and Social Impact Analysis:Universal Primary Education in Uganda: Equity in Opportunities and Human Capital Investment By Jean-Yves Duclos; Angela Kiconco; Sebastian Levine; Joseph Enyimu; Alex Warren Rodriguez; Albert Musisi
  30. Risk and Resilience: From Good Idea to Good Practice By Andrew Mitchell
  31. Economic growth in Ghana : determinants and prospect By Raggl, Anna K.
  32. Intergenerational Mobility and Interpersonal Inequality in an African Economy By Sylvie Lambert; Martin Ravallion; Dominique Van de Walle
  33. Impact of increased public education spending on growth and poverty in Uganda. An integrated micro-macro approach By Véronique Robichaud; Luca Tiberti; Hélène Maisonnave
  34. Structural change in Ethiopia : an employment perspective By Martins, Pedro
  35. Measuring the Impact of Marginal Tax Rate Reform on the Revenue Base of South Africa Using a Microsimulation Tax Model By Yolandé van Heerden and N.J. Schoeman
  36. History, Path Dependence and Development: Evidence from Colonial Railroads, Settlers and Cities in Kenya By Remi Jedwab; Edward Kerby; Alexander Moradi
  37. Loose Knots: Strong versus Weak Commitments to Save for Education in Uganda By Dean Karlan; Leigh L. Linden
  38. Analyzing the Theoretical and Empirical Foundations of Public Debt Dynamics in Zimbabwe By Nebson Mupunga and Pierre Le Roux

  1. By: James Fenske; Namrata Kala
    Abstract: Suppression of the slave trade after 1807 increased the incidence of conflict between Africans. We use geo-coded data on African conflicts to uncover a discontinuous increase in conflict after 1807 in areas affected by the slave trade. In West Africa, the slave trade declined. This empowered interests that rivaled existing authorities, and political leaders resorted to violence in order to maintain their influence. In West-Central and South-East Africa, slave exports increased after 1807 and were produced through violence. We validate our explanation using Southwestern Nigeria and Eastern South Africa as examples.
    Date: 2014
  2. By: Mason, Nicole M.; Jayne, T.S.; Mofya-Mukuka, Rhoda
    Abstract: Nearly three decades after the initiation of agricultural market reforms in Sub-Saharan Africa (SSA), subsidies for fertilizer and seed are once again the cornerstone of many SSA governments’ agricultural development and poverty reduction strategies. Zambia is a prime example. In the last decade, the Government of Republic of Zambia (GRZ) has devoted a considerable share of its agricultural budget to input subsidies. Between 2004 and 2011, spending on the Farmer Input Support Programme (FISP) accounted for an average of 30% of total GRZ agricultural sector spending, and 47% of GRZ agricultural sector Poverty Reduction Programme spending. Through FISP, GRZ provides beneficiary farmers with subsidized fertilizer and hybrid maize seed.
    Keywords: Agricultural and Food Policy, Crop Production/Industries, Food Security and Poverty, Political Economy,
    Date: 2013–08
  3. By: Carolyn Chisadza (Department of Economics, University of Pretoria); Manoel Bittencourt (Department of Economics, University of Pretoria)
    Abstract: IThis paper analyses the modernisation hypothesis in the sub-Saharan African region. Using a sample of 48 countries from 1960 to 2010 and dynamic panel data analysis, we find a significant and negative relationship between income and democracy, an indication that the hypothesis may not hold in the region. We also investigate further by distinguishing between exogenous and endogenous democracy. The former explains whether external factors, such as the end of the Cold War, as well as regional influence, play a role in the process of democratisation in sub-Saharan Africa. Results indicate that the end of the Cold War has a significant influence on the democratisation process probably because of the pro-democracy policies advocated by international organisations, while regional organisations play no significant role in the region. We also obtain significant results for democracy when we proxy for international organisations with an IMF programme variable.
    Keywords: Democracy, Sub-Saharan Africa
    JEL: O10 O55 P16
    Date: 2014–01
  4. By: Manoel Bittencourt (Department of Economics, University of Pretoria)
    Abstract: In this paper we investigate whether secondary school enrolment has played any role on total fertility rates in all fifteen members of the Southern African Development Community (SADC) between 1980 and 2009. The evidence, based on panel time-series analysis (we make use of the Pooled OLS, Fixed Effects and Fixed Effects with Instrumental Variables estimators), robustly suggest that education has indeed reduced fertility rates in the region, or that the community is already trading-off quantity for quality of children. The results are important not only because lower fertility, caused by education, implies more capital per worker, higher productivity and therefore higher growth rates, but also because in accordance to the unified growth theory they suggest that southern Africa is experiencing its own transition from the Malthusian epoch into a sustained (modern) growth regime.
    Keywords: Education, fertility, Africa
    JEL: I20 J13 O55
    Date: 2014–01
  5. By: Marcel Kohler
    Abstract: By international standards the economy of South Africa is extremely energy intensive with only a few countries having higher intensities. SA’s primary energy use per unit of GDP is amongst the highest in the world. The high energy and electricity intensity of the economy partly reflects SA’s resource endowments (in particular the abundance of coal) but is also a function of the historical under-pricing of coal and electricity by the authorities. South African mining & industrial electricity efficiency is particularly concerning and considerably lower than the global average. This paper sets out to fill a significant gap in the South African energy literature by highlighting the importance of incorporating electricity demand factors as part of the country’s energy policy and electricity planning horizon. The paper focuses its attention on modeling the electricity consumption of SA’s industrial and mining sectors given these account for the lion’s share of electricity demand. A differential electricity pricing policy which targets electricity intensive industrial and mining activities (as practiced in China since 2004) is viewed by the author to be a superior policy to blanket electricity price increases administered by authorities in an effort to encourage electricity savings and improve energy efficiency in South Africa.
    Keywords: Electricity consumption, industrial, South Africa
    JEL: Q41 C23
    Date: 2013
  6. By: Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
    Abstract: In this paper we investigate the role of inflation rates in determining economic growth in fifteen sub-Saharan African countries, which are all members of the Southern African Development Community (SADC), between 1980 and 2009. The results, based on panel time-series data and analysis, suggest that in‡ation has had a detrimental effect to growth in the region. All in all, we highlight not only the fact that inflation has offset the prospective Mundell-Tobin effect and consequently reduced, the much needed, economic activity in the region, but also the importance of an institutional framework conducive to a stable macroeconomic environment as a precondition for development and prosperity in the community.
    Keywords: Inflation, Growth, SADC
    JEL: E31 O11 O42 O55
    Date: 2014
  7. By: Alan Collins and Jen Snowball
    Abstract: Many governments have tried to stimulate economic growth via policy on the creative industries. South Africa is no different but additionally has an overarching aim of achieving social and labour market ‘transformation’ to move away from the legacy of the apartheid era. The effectiveness of incentives provided to the film and television sector in South Africa are considered in terms of their stated objectives of job creation, skills and knowledge transfer and the attraction of foreign direct investment. Informed by empirical analysis of incentive scheme data and supplemented by elite interviews with key informants, some specific policy revisions are proposed.
    Keywords: South Africa, transformation, job creation, subsidy, creative industries
    Date: 2013
  8. By: Grietjie Verhoef, Lorraine Greyling and John Mwamba
    Abstract: The sub-optimal savings propensity in South Africa the past three decades causes concern for the ability of the country to support its economic development. An historical analysis of the development of the savings’ trends in South Africa may assist in understanding the historical roots of the phenomenon. Apart from general descriptions of the nature of economic activity in the Cape Colony very little is known about the role financial sector development and savings played in the growing colonial economy. This paper explores the performance of the economy of the Cape Colony between 1850 and 1909, through the business cycles, financial sector stability, the nature and extent of economic activity and seeks to explain the relationship between savings and economic growth. The question is whether the general view that ‘financial development is robustly growth promoting’ can be substantiated in the last half of the nineteenth century Cape Colony? It contributes to the economic history literature on the colonial past of South Africa by using newly compiled data on the GDP of the Cape Colony during the last half of the nineteenth century. The paper finds that despite the expectations in the literature that financial deepening contributes to economic growth; the Cape Colony did not display such causal relationship between savings and economic growth in the period under review. The paper shows the different forms of savings in the colony and the trend of savings behavior in the period amidst the development of a relatively robust financial sector.
    Keywords: Cape Colony, economic growth, financial deepening, gross domestic product, savings
    JEL: N27
    Date: 2014
  9. By: Gabrielle Wills
    Abstract: This paper investigates whether teacher strikes affect student achievement at the primary school level in South Africa. A cross-subject analysis with student fixed effects is used to eliminate sources of endogeneity bias at the school and student level. Results indicate that teacher strike participation negatively affects learning for students in the poorest three quarters of schools in South Africa. A negative effect size as large as ten per cent of a standard deviation is observed. There is also evidence that more marginalised students, both in terms of socio-economic status and academic performance, are affected most negatively by strike action. However, application of a technique by Altonji, Taber and Elder (2005) indicates that it is not possible to rule out that measured strike effects may be driven by omitted variable bias. The student fixed effects strategy fails to adequately control for unobserved teacher characteristics that may influence both a teacher’s decision to strike and student achievement.
    Keywords: Teachers, Strikes, Trade unions, Student Achievement, South Africa
    JEL: I21 J51 J52 J24
    Date: 2014
  10. By: Manoel Bittencourt, Renee van Eyden and Monaheng Seleteng
    Abstract: In this paper we investigate the role of inflation rates in determining economic growth in fifteen sub-Saharan African countries, which are all members of the Southern African Development Community (SADC), between 1980 and 2009. The results, based on panel time-series data and analysis, suggest that in‡ation has had a detrimental effect to growth in the region. All in all, we highlight not only the fact that inflation has o¤set the prospective Mundell-Tobin effect and consequently reduced, the much needed, economic activity in the region, but also the importance of an institutional framework conducive to a stable macroeconomic environment as a precondition for development and prosperity in the community.
    Keywords: Inflation, Growth, SADC
    JEL: E31 O11 O42 O55
    Date: 2014
  11. By: Justin Visagie
    Abstract: This paper examines the development of the middle class in post-apartheid South Africa, using data from the 1993 Project for Statistics on Living Standards and Development, the 2000 Income and Expenditure Survey/Labour Force Survey and the 2008 National Income Dynamics Study. The affluent middle class are defined as individuals residing in a household with a per capita income of R1,400 – R10,000 per month in 2008 prices. The paper explores changes in the size of the middle class as well as the racial and gender profile of the middle class within the context of Black Economic Empowerment in South Africa. The affluent middle class experienced very modest growth over the period, only slightly ahead of population growth. There was however substantial churning in the racial composition of the middle class, with a large increase in the number of Africans accompanied by a fewer number of Whites. The gender profile of the middle class showed less conclusive evidence of transformation. The upper class similarly experienced significant racial transformation and more than doubled in size, and also accrued a higher share of total income (at the expense of the income shares of middle and lower classes).
    Keywords: Middle class, Post-apartheid, South Africa
    Date: 2013
  12. By: de Walque, Damien; Dow, William H.; Gong, Erick
    Abstract: Transactional sex is believed to be an important risk-coping mechanism for women in Sub-Saharan Africa and a leading contributor to the HIV/AIDS epidemic. This paper uses data from a panel of women in rural Tanzania whose primary occupation is agriculture. The analysis finds that following a negative shock (such as food insecurity), unmarried women are about three times more likely to have been paid for sex. Regardless of marital status, after a shock women have more unprotected sex and are 36 percent more likely to have a sexually transmitted infection. These empirical findings support the claims that transactional sex is not confined to commercial sex workers and that frequently experienced shocks, such as food insecurity, may lead women to engage in transactional sex as a risk-coping behavior.
    Keywords: Population Policies,Health Monitoring&Evaluation,Gender and Health,Adolescent Health,Gender and Law
    Date: 2014–01–01
  13. By: Sylvanus Kwaku Afesorgbor (Department of Economics and Business, Aarhus University, Denmark); Peter A.G. van Bergeijk (International Institute of Social Studies of Erasmus University, The Hague, Netherlands)
    Abstract: One of intriguing aspects of African Regional Trade Agreements (RTAs) is the extent of multi-membership, where many Africa countries are members of more than one RTA. Using a gravity model for 25 countries and the years 1980-2006 we measure the extent of multi-membership and compare its impact in two major African Regional blocs, ECOWAS and SADC. We find that the impact of multi-membership critically depends on the characteristics of the multi-membership of regional integration initiatives. We find a positive impact if an additional membership complements the integration process of the original regional integration initiative: overlapping memberships had a much stronger and significant positive effect on bilateral trade within ECOWAS compare to an insignificant impact within SADC.
    Keywords: Multi-membership, Regional Economic Integration, Gravity Model, ECOWAS, SADC
    JEL: F1 F15
    Date: 2014–01–23
  14. By: Leroi Raputsoane and Ruthira Naraidoo
    Abstract: This study assesses debt sustainability in South Africa allowing for possible nonlinearities in the form of threshold behaviour by fiscal authorities. A long historical data series on the debt-to-GDP ratio and models with fixed and time-varying thresholds allowing the level of debt to vary relative to its recent history and the occurrence of financial crises are used in the analysis. First, the results reveal that fiscal consolidation occurs at a much lower debt-to-GDP ratio of 46 percent in the period 1946 to 2010 compared to 65 percent in the period 1865 to 1945. Secondly, the results provide evidence of a statistically insignificant fiscal consolidation below these threshold levels. Thirdly, the results reveal that fiscal consolidation occur at a higher debt-to-GDP ratio during financial crises periods.
    Keywords: Debt sustainability, thresholds, financial crises
    JEL: C22 C51 E62 H63
    Date: 2014
  15. By: Edgar F.A. Cooke; Sarah Hague; John Cockburn; Abdel-Rahmen El Lahga; Luca Tiberti
    Abstract: Governments across Africa have faced increasing challenges to maintain fuel subsidies over recent years. In Ghana, in the face of a near 12% fiscal deficit in 2012, their burgeoning cost has drawn attention to questions of fiscal sustainability as well as their overall efficiency and effectiveness. In 2013, the Ghanaian Government would have spent cost 2.4 billion GHS (approximately 1.2 billion USD) on fuel subsidies, equalling 3.2% of GDP and more than half of Ghana's allocation to the entire education sector. Fuel subsidies....
    Keywords: --
    Date: 2014
  16. By: Saule Baurzhan (Department of Economics, Eastern Mediterranean University, Mersin 10, Turkey); Glenn P. Jenkins (Department of Economics, Queen's University, Canada, Eastern Mediterranean University, Mersin 10, Turkey)
    Abstract: Many public electric utilities and countries in Africa are capital constrained while the growth in demand for electricity is increasing. In this paper an economic analysis is carried out that investigate the efficiency of investing in solar photovoltaic (PV) power plants for grid generation in such a capital constrained countries. The major benefits of the solar power generation are reductions in operating costs (mainly fuel), greenhouse gas (GHG) emissions, and other pollutants of displaced fossil fuel generation. These same benefits could be realised if efficient thermal power plants were used to displace fuel inefficient thermal plants. The amount of fuel savings, GHG emission mitigation, levelized cost of electricity generation are calculated for both solar PV and combined cycle power plants to determine the economic feasibility of introducing solar generation facilities. Investing in combined cycle power plants powered by heavy fuel oil (HFO) is three times as effective in reducing greenhouse gases as the same investment made in solar PV plants. Even If solar investment costs fall as anticipated, it will take at least 16 years of continuous decline before solar generation technology will become cost-effective.
    Keywords: Electricity Generation, Cost–Benefit Analysis, Africa
    JEL: L94 D61 O55
    Date: 2014–01
  17. By: Nonso Obikili
    Abstract: I examine the possibility that the trans-Atlantic slave trades influenced the political institutions of villages and towns in precolonial Africa. Using anthropological data, I show that villages and towns of ethnic groups with higher slave exports were more politically fragmented during the precolonial era. I use instrumental variables to show that the relationship is at least partly causal. I argue this fragmentation is important for relative economic development because it still influences political institutions today. I support this argument by using more contemporary data to show that areas with higher precolonial political fragmentation have a higher incidence of bribery.
    Keywords: Trans-Atlantic, Slave trade, Poltical
    Date: 2014
  18. By: Strange, Austin M.; Parks , Bradley; Tierney, Michael J.; Fuchs, Andreas; Dreher , Axel
    Abstract: China’s development finance is sizable but reliable information is scarce. To address critical information gaps, we introduce a new open source methodology for collecting project-level development finance information and create a database of Chinese official finance to Africa from 2000-2011. Our initial data collection efforts found that China’s official finance commitments amount to approximately US$ 73 billion over the 2000-2011 period. We provide details on 1,511 non-investment projects to 50 African countries. We use this database to extend previous research on the aid-conflict nexus. Our results show that sudden withdrawals of “traditional” aid are only more likely to induce conflict in the absence of sufficient alternative funding from China. More broadly, these findings highlight the importance of gathering better data on the development activities of China and other non-traditional donors to better understand the link between foreign aid and conflict.
    Keywords: Development Finance; Foreign Aid; Non-DAC Donors; South-South Cooperation; China; Aid Shocks; Violent Armed Conflict.
    Date: 2014–01–29
  19. By: Winkler, Adalbert; Wagner, Charlotte
    Abstract: We provide evidence on the growth patterns of microfinance clients. Our analysis is motivated by the debate on the impact of microfinance on client income and growth. Based on loan-level data from close to 40,000 clients in Sub-Saharan Africa we make use of an econometric approach widely employed in the firm growth literature. Results show that on average clients exhibit substantial growth between two consecutive loans. Moreover, there is a non-linear relationship between initial client size and growth: smaller businesses show higher growth rates which is marginally counteracted by positive growth of the very large clients. Results also indicate that growth rates decline in the course of the lending relationship. Overall our results provide econometric support for the largely anecdotal evidence presented by microfinance practitioners that their clients grow. At the same time they suggest that the equilibrium size of most clients remains small. --
    JEL: D22 G21 L25
    Date: 2013
  20. By: M du Preez and MC Sale
    Abstract: In most hedonic price model studies, the actual sales price of a property is employed as the dependent variable in the parametric regression analysis. Although the use of this price is pervasive, alternatives to it do exist. One such alternative is the assessed property value, which is more readily available compared to the actual property price. The aim of this study is to compare implicit price estimates of property characteristics (both structural and locational) based on actual sales price data and assessed property values. To this end, a seemingly unrelated regression with two hedonic price equations is used, one which employs actual market prices as the dependent variable and the other which employs assessed values. The results show that the hypothesis that the influence of structural and locational housing characteristics on residential property prices is the same for assessed values and actual market prices cannot be accepted. This finding should act as a caution for hedonic practitioners not to solely base their conclusions and recommendations on the use of assessed values in hedonic price models.
    Keywords: Municipal Assessments, Sales Price, hedonic price, South Africa
    JEL: C50 R14 R15
    Date: 2014
  21. By: Daniel King and Ferdi Botha
    Abstract: This paper examines whether accounting for structural changes in the conditional variance process, through the use of Markov-switching models, improves estimates and forecasts of stock return volatility over those of the more conventional single-state (G)ARCH models, within and across selected African markets for the period 2002-2012. In the univariate portion of the paper, the performances of various Markov-switching models are tested against a single-state benchmark model through the use of in-sample goodness-of-fit and predictive ability measures. In the multivariate context, the single-state and Markov-switching models are comparatively assessed according to their usefulness in constructing optimal stock portfolios. Accounting for structural breaks in the conditional variance process, conventional GARCH effects remain important in capturing heteroscedasticity. However, those univariate models including a GARCH term perform comparatively poorly when used for forecasting purposes. In the multivariate study, the use of Markov-switching variance-covariance estimates improves risk-adjusted portfolio returns relative to portfolios constructed using the more conventional single-state models. While there is evidence that some Markov-switching models can provide better forecasts and higher risk-adjusted returns than those models which include GARCH effects, the inability of the simpler Markov-switching models to fully capture heteroscedasticity in the data remains problematic.
    Keywords: Stock returns, volatility, GARCH, Africa
    JEL: C52 C58
    Date: 2014
  22. By: James Levinsohn (Jackson Institute for Global Affairs, Yale University); Neil Rankin (Department of Economics, University of Stellenbosch); Gareth Roberts (African MicroeconomicResearch Unit, University of the Witwatersrand); Volker Schöer (African MicroeconomicResearch Unit, University of the Witwatersrand)
    Abstract: • Youth unemployment in South Africa is high, differs substantially by race group and is increasing. In 2012, close to two-thirds of young Africans were broadly unemployed. Over the four years prior to this the unemployment rate had increased by almost ten percentage points. • A wage subsidy is one type of intervention which aims to reduce youth unemployment by providing a subsidy to firms which covers part of the cost of employing young people. The outline of a youth employment incentive was provided by the National Treasury in 2011. • Evidence from other countries suggests that the success of a wage subsidy can be context specific and depends on the nature of the intervention and the structure of the labour market amongst other things. Thus, in order to understand how a wage subsidy may affect youth unemployment it is useful to know how South African young people and firms may react to a wage subsidy. A randomised control trial (RCT) is one way to investigate this. • In an RCT the participants in the study are randomly divided into two groups – one which received the intervention, in this case a voucher for a wage subsidy which a firm who employs the individual could claim for six months (called the treatment group), and the second group which does not receive anything (called the control group). Since allocation to the groups is random and both groups share similar characteristics, any observed changes on average should be the result of the wage subsidy voucher. We can thus attach a causal interpretation to our results. • The key finding of the paper is that those who were allocated a wage subsidy voucher were more likely to be in wage employment both one year and two years after allocation. The impact of the voucher thus persisted even after it was no longer valid. The magnitude of these effects was relatively large – those in the voucher group were 7.4 percentage points (approximately 25 percent) more likely to be in wage employment one year after allocation and of similar magnitude two years later. This impact was not driven by changes in the sample composition. • This suggests that those young people who entered jobs earlier than they would have because of the voucher were more likely to stay in jobs. This confirms the important dynamic impacts of youth employment. It also suggests that government interventions which successfully create youth employment are important and can virtuous longer-term effects. • Relatively few firms actually claimed the voucher. Interviews with firms and young people suggest that this was for a number of reasons: the young people did not even get a chance to show the voucher to someone who makes hiring decision; the administrative burden associated with claiming the money, although not onerous, could not be overcome (for example, larger firms did not have a process for accepting subsidy money, human resource functions were centralised and HR had little incentive to engage in the process of claiming the voucher); or managers or firm owners questioned the legitimacy of the voucher. This suggests that a national wage subsidy policy would need to be widely advertised and information and support provided to firms who would like to claim the subsidy. • However, the impact of the voucher among those individuals who were employed in firms who claimed or enquired about the subsidy was much larger than the broader estimated effect. In this paper we are unable to ascertain whether these jobs were new or not. • Even after controlling for firm take up and enquiry there is still a difference in the probability of wage employment between the group with a voucher and the group without. This indicates that part of the impact of the voucher is through supply side responses of those allocated the voucher. • The results indicate that the observed impact of the voucher is not driven by changes in search, increases in search intensity or movement either to look for jobs or to take up employment. • Rather it seems that part of the impact may be driven by people turning down job offers. Those in the control group, especially those in households with other employed members, were more likely to turn down job offers than those in the treatment group. This suggests that there is some queuing in the South African youth labour market as young people who can wait for better paid jobs do. • We can only speculate about why those in the treatment group did not engage in this behaviour. One explanation is that the voucher changed their perceptions of potential success in the job market and thus they were more willing, or able, to go to these jobs, since they thought the voucher advantaged them or they were able to borrow money from their households to travel and incur the initial costs associated with accepting a job. It may also be that households which contained voucher holders were more likely to encourage the holder to take up the job since it was perceived as part of a special programme, or it may be that more information about jobs was passed onto the households of voucher holders with employees since they were linked into firms and people in their network may have known about the voucher. • These results confirm that the structure of the household is important for success in the labour market. Research on South African labour markets shows that networks are the main channel through which information about jobs is transmitted. Households with working members are thus advantaged since members receive more information about jobs. These types of households can also provide intra-household cash transfers to help pay for transport costs or other costs associated with taking up a job. • However, there can also be relatively negative implications for young people in households with other earners – they can afford to turn down jobs as they wait for potentially better paying or better matched jobs. The consequences of this may not necessarily be negative if these types of jobs eventually arrive but if they do not then these young people have sacrificed both earnings and work experience as they wait.
    Keywords: wage subsidies, youth employment, South Africa, impact evaluation, randomised control trials, employment incentives
    JEL: C93 D22 H25 J22 J23 J58
    Date: 2014
  23. By: Dambala Gelo, Steven F. Koch and Edwin Muchapondwa
    Abstract: Existing literature have rarely evaluated distributive effect of Joint Forest Management (JFM) augmented with improved market linkages for non-timber forest products nor have they accounted for heterogeneity in the welfare effects. We assess the distributional impact of a unique JFM in Ethiopia in which additional support for improved market linkages for non-timber forest products was provided. The analysis is based on matching and instrumental variable (IV) methods of quantile treatment effects (QTE) evaluation using household data from selected rural villages of Gimbo district, in southwest Ethiopia. The results confirm that the intervention affect outcomes heterogeneously across the welfare distribution. Specifically, the program was found to raise welfare for only those along upper half (median and above) of welfare distribution. Thus, we infer that the program is not pro-poor, and, therefore, is not equity enhancing. Our analysis also revealed that such distributional bias of the program benefit arises from elite capture.
    Keywords: Market Linkage, Joint Forest Management, Quantile Treatment Effects, Welfare Distribution
    Date: 2013
  24. By: Eliphas Ndou and Siobhan Redford
    Abstract: This paper follows work by Choi, Kim and O’Sullivan (2011), but deviates from their analysis by looking at the relative price variability (RPV) of selected components of the consumer price index (CPI) rather than an aggregate measure. The purpose of this work is to analyse which components are more variable and to see if there has been a change in the RPV (i.e., mean and distribution) since the adoption of inflation targeting (IT) in South Africa. A semi-parametric methodology has been used, and the RPV of components pre-IT and during the IT era were considered to see if the relationship of RPV components produces results similar to those presented for aggregate headline CPI for South Africa in Choi et al. (2011). The results suggest that in most cases, the components of the CPI have experienced decreased mean inflation rates and narrower distributions during the IT period with the changes in the mean and distribution of RPV decreasing and narrowing in most cases. Furthermore, the nature of the relationship of the RPV of the components with inflation seems to fit a quadratic specification well, with a minimum relative price variability at a positive rate of inflation. These results are found to be fairly robust during the period tested.
    Keywords: deviation, inflation targeting (IT), relative price variability (RPV)
    JEL: E31 E52
    Date: 2014
  25. By: Dranev Yury (National Research University Higher School of Economics); Fomkina Sofya (National Research University Higher School of Economics)
    Abstract: We introduce a new asset pricing model to account for risk asymmetrically in a very natural way. Assuming asymmetric investor behavior we develop a utility function similar to a quadratic utility but include a colog measure for capturing risk attitude. Asymmetry in investor preferences follows the asymmetric relationships between asset and market returns in equilibrium. Moreover the local version of the model depends on the characteristics of domestic markets, which is reflected in the different relationship between asset and market returns. We test the model in the Russian and South African markets and show that market premium in the Russian market is higher than in the South African market.
    Keywords: asset pricing models, risk measures, asymmetric investor’s preferences, market risk premium.
    JEL: G12 G15
    Date: 2013
  26. By: Achyuta Adhvaryu; James Fenske; Anant Nyshadham
    Abstract: We study the origins of adult mental health using early life income fluctuations. Combining a time series of real producer prices of cocoa with a nationally representative household survey in Ghana, we show that a one standard deviation rise in the cocoa price in early life decreases the likelihood of severe mental distress in adulthood by 3 percentage points (or half the mean prevalence) for cohorts born in cocoa-producing regions relative to other regions. Impacts on related personality traits are consistent with this result. Maternal nutrition, reinforcing childhood investments, and adult circumstance are operative channels of impact.
    Keywords: early life, mental health, endowments, commodity prices, Ghana
    JEL: I12 I15 O12
    Date: 2014
  27. By: Girum Abebe (Ethiopian Development Research Institute); Florian Schaefer (Department of Development Studies, SOAS (University of London))
    Abstract: In the presence of standardized production technology and the possibility of potentially unlimited market rendered by international trade, there is clear comparative advantages to be realized in experimenting with industrial polices in the leather industry in Ethiopia. This paper reviews wide arrays of policy interventions in the industry and, more modestly, attempts to link these interventions with the performance observed in the industry. We find that industrial policies in the leather sector have been largely effective driving strong growth. This growth, however, has not been in par with its potentials. Market problems along the supply-chain, liquidity constraint, limited processing and marketing capacity, inefficient regulations and enforcement capacity and coordination problem have culminated into below- potential levels of production and, hence, export earnings. We believe that, impressive results to date notwithstanding, important improvements still need to be made in terms of policy responsiveness and in ensuring growth is broad-based across relevant value chains. While building market institutions to bring down transactions costs will improve the effectiveness of industrial polices in the sector, policy makers should ensure that existing regulations are transparent, enforceable and do not impose undue burden on investments in the industry. Continuous channels of communication and information exchanges between the private sector and the regulatory organ would accelerate the understanding of constraints and their apt solutions.
    Keywords: Industrial Policy, Leather, capacity, value chain, markets
    Date: 2013–12
  28. By: Federico Ciani; Gianna Claudia Giannelli
    Abstract: Between April and July 1994 Rwanda experienced a tremendous wave of inter-ethnic violence that caused at least 500,000 deaths. Combining birth history data drawn from the 2000 Rwanda Demographic and Health Survey with prefecture-level information on the intensity of the conflict, we examine the impact of the civil war on infant and child mortality. War exposure is measured exploiting the differential effects of timing of birth and genocide intensity at the household and geographic level. Considering both in utero and postnatal war exposure, we estimate discrete time proportional hazard models of child mortality for the exposed and the unexposed birth cohorts. We find large positive effects of exposure to the conflict on infant and child mortality. Moreover, restricting our sample to the survivors, we find that child mortality is significantly impacted by war exposure, increasing the hazard rate by nearly 6 percentage points on average. This result holds true also for children who were only exposed while in utero. This evidence points to the existence of long-term disruptive effects on the cohorts of children exposed to the violence.
    Keywords: genocide, child mortality, child health, survival analysis, Rwanda
    JEL: I20 J13 O12 Z13
    Date: 2013
  29. By: Jean-Yves Duclos; Angela Kiconco; Sebastian Levine; Joseph Enyimu; Alex Warren Rodriguez; Albert Musisi
    Abstract: This paper assesses the effectiveness and progressivity of Uganda’s Universal Primary Education program since it was first introduced in 1997, by examining factors driving primary school attendance, grade delay and drop out trends for children between the ages of 6 and 12 over the past two decades. Our findings reveal that primary school attendance has been progressive over time and, in recent years, pro-poor, in the sense that the poorest people have been its major beneficiaries. However, both demand and supply-side factors affecting the provision and use of primary education still stand in the way of achieving optimal and equitable participation from UPE. Our analysis also suggests that policies targeting the poor as well as the poorer parts of the country could yield considerable additional benefits, in terms of greater progressiveness and propoorness of the UPE policy.
    Keywords: Universal Primary Education; Uganda; Poverty and Social Impact analysis
    Date: 2013
  30. By: Andrew Mitchell
    Abstract: Resilience has gained significant prominence following the re-examination of the performance of the humanitarian and development aid systems in light of the two major food security crises in East and West Africa over the last two years, coupled with ongoing ‘post-2015’ negotiations on key global disaster risk reduction, climate change and development policy and resourcing. Resilience has largely been communicated by donor and other key actors as a political agenda, devoid of clear technical guidance as to its added value and how it changes programming on the ground. As a result, country staff are either cynical of its value, are confused as to what it means, or use it as another opportunity to attract funding or to justify their narrow institutional mandate. There are relatively few actors who engage with resilience armed with specific technical guidance informed by comprehensive risk and vulnerability analyses. The continued ‘improper’ application of resilience reinforces some views that this is another ‘buzzword’ or ‘fad’, devoid of real meaning for programming, and will mean that the approach will be eventually dropped from policy and programming when ‘the next big thing’ comes along. This study argues that resilience has sufficient technical added-value (distinct from resilience as a political agenda) and outlines how it can be applied to programming, and, in response to challenges on the ground how donors and key partners can incentivise integrating resilience into programming. There are also recommendations for further study to support further integration of resilience into programming.
    Date: 2013–12–16
  31. By: Raggl, Anna K.
    Abstract: This paper employs a simple cross-country panel framework to assess the determinants of growth in Ghana's gross domestic product over the past four decades. A set of standard covariates is used to explain growth rates. Natural resource variables are included because the effects of natural resource rents in gross domestic products are of particular interest for Ghana. Using the preferred specification, Ghana's growth potential is predicted for the upcoming decades under different scenarios. The results indicate that under the most pessimistic scenario of no improvements in the determinants of growth compared with the period 2005-09, Ghana's gross domestic product per capita growth rates will stagnate at approximately 4.5 percent during the next decade and decrease thereafter. If the policy measures and country characteristics improve in the way they did in the past three decades, average per capita growth rates of roughly 5.5 percent could be reached during 2015-34. Taking into account the expected oil production until 2034 adds 0.6 percentage points to projected gross domestic product growth rates on average.
    Keywords: Achieving Shared Growth,Economic Theory&Research,Labor Policies,Environmental Economics&Policies,Inequality
    Date: 2014–01–01
  32. By: Sylvie Lambert (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Martin Ravallion (Georgetown University - Georgetown University); Dominique Van de Walle (Banque Mondiale - Banque Mondiale)
    Abstract: How much economic mobility is there across generations in a poor, primarily rural, economy? How much do intergenerational linkages contribute to current inequality? We address these questions using original survey data on Senegal that include an individualized measure of consumption. While intergenerational linkages are evident, we find a relatively high degree of mobility across generations, associated with the shift from farm to non-farm sectors and greater economic activity of women. Male-dominated bequests of land and housing bring little gain to consumption and play little role in explaining inequality, though they have important effects on sector of activity. Inheritance of non-land assets and the education and occupation of parents (especially the mother) and their choices about children's schooling are more important to adult welfare than property inheritance. Significant gender inequality in consumption is evident, though it is almost entirely explicable in terms of factors such as education and (non-land) inheritance. There are a number of other pronounced gender differences, with intergenerational linkages coming through the mother rather than the father.
    Keywords: inheritance, land, mobility, inequality, gender
    Date: 2014–01
  33. By: Véronique Robichaud; Luca Tiberti; Hélène Maisonnave
    Abstract: The objective of this paper is to assess the impact of increased public expenditures in education on school participation, skill level of the workforce, occupational choices between self‐employed and wage earners, economic performance, poverty reduction and income distribution. These additional expenditures in education are financed either through increased indirect taxes, or using the funds to be generated by the exploitation of oil resources. The best suited tool to evaluate the impact of such policies and financing mechanisms on the economy is a computable general equilibrium model (CGE) as this type of tool takes into account the interactions between all of the actors of an economy in a consistent framework. Impacts on prices, volumes and school performance will affect differently the households and thus, in order to compute how these results will affect the income distribution and poverty, a micro model is needed as well. Standard CGE models do not explicitly set out the relationship between education spending, school performance, skill level of workers and their choices on the labor market. Hence, we suggest using an integrated dynamic macro‐micro approach that models those important linkages, where a detailed schooling module is developed at both the macro and micro level to track the transition of students into the skilled and unskilled labor markets.
    Keywords: Child Poverty; Education; Dynamic General Equilibrium; Micro-Simulation; Uganda
    JEL: I32 D58 C50 O55
    Date: 2014
  34. By: Martins, Pedro
    Abstract: This paper investigates whether the Ethiopian economy is undergoing a virtuous process of structural change. In particular, it assesses the relative contributions of within-sector and between-sector productivity to output per capita growth. Based on data disaggregated into eight sectors for the period 1996-2011, the analysis suggests that the structure of output has changed considerably -- predominantly from agriculture to services -- but changes in the composition of employment have lagged behind. Labor productivity growth has been strong across most sectors, albeit mainly driven by within-sector productivity improvements. Nonetheless, the pace of structural change is accelerating and its relative contribution to output growth is increasing.
    Keywords: Labor Markets,Labor Policies,Economic Theory&Research,E-Business,Labor Management and Relations
    Date: 2014–01–01
  35. By: Yolandé van Heerden and N.J. Schoeman
    Abstract: This paper is primarily concerned with the revenue and tax efficiency effects of adjustments to marginal tax rates on individual income as an instrument of possible tax reform. The hypothesis is that changes to marginal rates affect not only the revenue base but also tax efficiency and the optimum level of taxes that supports economic growth. Using an optimal revenue maximising rate (based on Laffer analysis) the elasticity of taxable income is derived with respect to marginal tax rates for each taxable income category. These elasticities are then used to quantify the impact of changes in marginal rates on the revenue base and tax efficiency using a microsimulation (MS) tax model. In this first paper on the research results much attention is paid to the structure of the model and the way in which the data base has been compiled. The model allows for the dissemination of individual taxpayers by income groups, gender, educational level, age group, etc. Simulations include a scenario with higher marginal rates which is also more progressive (as in the 1998/1999 fiscal year) in which case tax revenue increases but the increase is overshadowed by a more than proportional decrease in tax efficiency as measured by its deadweight loss. On the other hand, a lowering of marginal rates (to bring South Africa’s marginal rates more in line with those of its peers) improves tax efficiency but also results in a substantial revenue loss. The estimated optimal individual tax to GDP ratio to maximise economic growth (6.7 per cent) shows a strong response to changes in marginal rates and the results from this research indicate that a lowering of marginal rates would also move the actual ratio closer to its optimum level. Thus, the trade-off between revenue collected and tax efficiency should be carefully monitored when personal income tax reform is being considered.
    Keywords: microsimulation, tax efficiency, optimal tax, tax reform, personal income tax
    JEL: H21 H24 H31
    Date: 2013
  36. By: Remi Jedwab; Edward Kerby; Alexander Moradi
    Abstract: Little is known about the extent and forces of urban path dependence in developing countries. Railroad construction in colonial Kenya provides a natural experiment to study the emergence and persistence of this spatial equilibrium. Using new data at a fine spatial level over one century shows that colonial railroads causally determined the location of European settlers, which in turn decided the location of the main cities of the country at independence. Railroads declined and settlers left after independence, yet cities persisted. Their early emergence served as a mechanism to coordinate investments in the post-independence period, yielding evidence for how path dependence influences development.
    Keywords: Path Dependence; Urbanisation; Transportation; Colonialism
    JEL: R11 R12 R40 O18 O33 N97
    Date: 2014
  37. By: Dean Karlan; Leigh L. Linden
    Abstract: Commitment devices offer an opportunity to restrict future choices. However, if severe restrictions deter participation, weaker restrictions may be a more effective means of changing behavior. We test this using a school-based commitment savings device for educational expenses in Uganda. We compare an account fully-committed to educational expenses to an account in which savings are available for cash withdrawal but intended for educational expenses. The weaker commitment generates increased savings in the program accounts and when combined with a parent outreach program, higher expenditures on educational supplies. It also increases scores on an exam covering language and math skills by 0.14 standard deviations. We find no effect for the fully-committed account, and we find no effect for either account on attendance, enrollment, or non-cognitive skills.
    JEL: D12 D91 I21 O12
    Date: 2014–01
  38. By: Nebson Mupunga and Pierre Le Roux
    Abstract: This paper provides an analysis of the theoretical and empirical foundations of public debt dynamics in Zimbabwe. The analysis was undertaken by applying the debt dynamics equation that enables estimating the required primary balance, building on the government inter-temporal budget constraint to infer the factors that influence public debt, as well as to ascertain specific policy issues required to ensure a sustainable public debt structure. The results from the simulation analysis show that debt dynamics in Zimbabwe are largely composed of huge stock flow adjustments to finance social and political related expenditures. This underscores the need for prudent debt management to guard against unexpected changes in public debt, which are not explained by fundamentals. The major policy implication from the study is the need to minimize the interest rate growth differential and to implement growth enhancing fiscal policies to ensure a sustainable long term public debt position.
    Keywords: Automatic Debt Dynamics, Public Debt Dynamics, Snowballing Effect, Debt Stabilising Primary Balance
    Date: 2014

This nep-afr issue is ©2014 by Quentin Wodon. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.