nep-afr New Economics Papers
on Africa
Issue of 2015‒03‒22
eleven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Toward an Understanding of Economic Growth in Africa: A Re-Interpretation of the Lewis Model By Xinshen Diao; Margaret McMillan
  2. Rational Asymmetric Development, Piketty and the Spirit of Poverty in Africa By Simplice Asongu
  3. The effectiveness of index futures hedging in emerging markets during the crisis period of 2008-2010: Evidence from South Africa By Bonga-Bonga, Lumengo; Umoetok, Ekerete
  4. The Impact of Training on Technology Adoption and Productivity of Rice Farming in Tanzania: Is Farmer-to-Farmer Extension Effective? By Nakano, Yuko; Tsusaka, Takuji W.; Aida, Takeshi; Pede, Valerien O.
  5. Social capital and access to primary health care in developing countries: Evidence from Sub-Saharan Africa By Guillaume Hollard; Omar Sene
  6. Income shocks and conflict : evidence from Nigeria By Abidoye,Babatunde Oluwakayode; Cali,Massimiliano
  7. Mark-ups and competition: a comparison of the profitability of listed South African industrial companies By Stan du Plessis; Nico Katzke; Evan Gilbert; Chris Hart
  8. Maize Productivity and Input Subsidies in Malawi: A State-Contingent Stochastic Production Frontier Approach By Holden , Stein; O’Donnell, Christopher J.
  9. Forest reliance across poverty groups in Tanzania By Dokken, Therese; Angelsen, Arild
  10. Understanding farmers’ adaptation to water scarcity: a case study from the western Nile Delta, Egypt. By Ghazouani, W.; Molle, F.; Swelam, A.; Rap, E.; Abdo, A.
  11. The Role of Education and Family Background in Marriage, Childbearing and Labor Market Participation in Senegal By Marchetta, Francesca; Sahn, David E.

  1. By: Xinshen Diao; Margaret McMillan
    Abstract: Africa’s recent economic growth is at a historical high. The patterns associated with this growth appear to be quite different from the Asian experiences where rapid growth was fueled by labor intensive, export-oriented manufacturing. Because this pattern differs with our typical view of structural transformation, a heated debate has begun over the sustainability of Africa’s growth. One thing is clear: the recent growth is not well understood. Against this background, we adapt Lewis’s (1954) dual-economy model to the economies of Africa to better understand the role that the “in-between” sector as defined by Lewis (1979) has played in Africa’s recent growth. Our framework incorporates the coexistence of a closed and an open modern economy and takes into account the diversity and heterogeneity of the activities that characterize modern African economies. We apply this framework to the economy of Rwanda to assess Rwanda’s future growth prospects based on different levels of foreign capital inflows. We find that higher foreign inflows lead to significantly more growth in the closed modern economy and stagnant growth in the open modern economy, a phenomenon consistent with recently observed patterns of growth across several African countries.
    JEL: O11 O55
    Date: 2015–03
  2. By: Simplice Asongu (Yaoundé/Cameroun)
    Abstract: The study extends the implications of Piketty’s celebrated literature from developed countries to the nexus between developed nations and African countries by building on responses from Rogoff (2014) & Stiglitz (2014), post Washington Consensus paradigms and underpinnings from Solow-Swan & Boyce-Fofack-Ndikumana. The central argument presented is that the inequality problem is at the heart of rational asymmetric development between rich and poor countries. Piketty has shown that inequality increases when the return of capital is higher than the growth rate, because the poor cannot catch-up with the rich. We argue that, when the return of political economy (or capitalism-fuelled illicit capital flight) is higher than the growth rate in African countries, inequality in development increases and African may not catch-up with the developed world. As an ideal solution, Piketty has proposed progressive income taxation based on automatic exchange of bank information. The ideal analogy proposed in tackling the spirit of African poverty is a holistic commitment to fighting illicit capital flight based on automatic exchange of bank information. Hence, contrary to theoretical underpinnings of exogenous growth models, catch-up may not be so apparent. Implications for the corresponding upward bias in endogenous development and catch-up literature are discussed.
    Keywords: Piketty, Inequality, Foreign aid, Capital flight, Development
    JEL: B20 F35 F50 O19 O55
    Date: 2015–03
  3. By: Bonga-Bonga, Lumengo; Umoetok, Ekerete
    Abstract: This paper provides an assessment of the comparative effectiveness of four econometric methods in estimating the optimal hedge ratio in an emerging equity market, particularly the South African equity and futures markets. The paper bases the effectiveness of hedging on volatility reduction and minimisation of the coefficient of variation of hedged returns as well as risk-aversion based utility maximisation. The empirical analysis shows that the single equation method estimated by ordinary least squares is the most effective over daily hedging periods. However, the vector error-correction method and multivariate GARCH methods are most effective over weekly and monthly hedging periods.
    Keywords: emerging markets, optimal hedge ratio, South Africa, index futures hedging, Vector autoregression, Vector error-correction, GARCH
    JEL: C5 C58 G13
    Date: 2015–03–17
  4. By: Nakano, Yuko; Tsusaka, Takuji W.; Aida, Takeshi; Pede, Valerien O.
    Abstract: How far can new technologies taught to a small number of selected farmers diffuse to other farmers in a village? In order to answer this question, this paper investigates the impact of JICA training on the adoption of rice cultivation technologies and productivity in an irrigation scheme in Tanzania. By using a unique five-year panel data set and spatial econometric techniques, we found that non-trained farmers learned new technologies from trained farmers through social networks and by observing their plots. As a result, the paddy yield of directly trained farmers increased from 3.1 tons per hectare in 2008 to 4.7 tons per hectare in 2012, while that of non-trained farmers increased from around 2.6 tons per hectare in 2008 to 3.7 tons per hectare in 2012.
    Keywords: technology adoption , agricultural training , social learning, rice , Sub-Saharan Africa
    Date: 2015–03–09
  5. By: Guillaume Hollard; Omar Sene
    Abstract: We test the causal role of social capital, as measured by self-reported trust, in determining access to basic health facilities in Sub-Saharan Africa. To skirt reverse-causality problems between social capital and basic health, we rely on instrumental variable (IV) estimates. The results show that a one standard deviation increase in the level of localized trust leads to a 0.221 standard deviation decrease in the predicted value of doctor absenteeism, a 0.307 standard deviation decreases in the predicted value of waiting time and a 0.301 standard deviation decreases in the predicted value of bribes. As a robustness check, we also use a different database regarding a different health issue, namely access to clean water. We find that a one standard deviation increase in the level of localized trust leads to a 0.330 standard deviation increase in the access on clean water. All in all, social capital is found to have an important causal effect on health, even stronger that the one found in western countries.
    Keywords: Social Capital, Health, Africa, Causality.
    JEL: I15 I12 D71 I18 H41
    Date: 2015
  6. By: Abidoye,Babatunde Oluwakayode; Cali,Massimiliano
    Abstract: This paper extends the micro evidence on the impact of income shocks on civil conflict using data across Nigerian states over the past decade. The paper uses an innovative empirical strategy matching household survey, oil production, and domestic and international price data to capture three separate channels linking income changes to conflict. Price increases of consumed items have a significant conflict-inducing effect consistent with the hypothesis that they reduce real incomes and thus the opportunity cost of fighting. Failure to include this consumption impact severely biases (toward zero) the conflict-reducing effect of price rises of agricultural commodities via production. In addition, oil price hikes increase conflict intensity in oil producing areas, consistent with the"rapacity"hypothesis. However, this effect disappears in the period after the agreement granting amnesty to militant groups in oil-producing areas. The paper also discusses the importance of factors mediating the impact of the shocks on conflict and a number of policy implications following the analysis. Finally, the empirical strategy is employed to unveil a strong relationship between income shocks and violence in the current Boko Haram conflict. The analysis suggests some policy implications, which may be relevant for the Nigerian context and beyond.
    Keywords: Economic Theory&Research,Rural Poverty Reduction,E-Business,Markets and Market Access,Emerging Markets
    Date: 2015–03–11
  7. By: Stan du Plessis (Department of Economics, University of Stellenbosch); Nico Katzke (Department of Economics, University of Stellenbosch); Evan Gilbert (Department of Economics, University of Stellenbosch); Chris Hart (Department of Economics, University of Stellenbosch)
    Abstract: This paper tests the well-established finding in the literature that SA firms are significantly more profitable and operate in a highly concentrated market, relative to that of their foreign counterparts. In particular we question the conclusions drawn by Aghion, Braun, and Fedderke (2008) who find that South African firms enjoy profitability margins more than double that in other countries for a sample from 1980 to 2004. We test this claim empirically by using survivorship bias corrected datasets of the top 25 South African industrial firms listed on the JSE (by market capitalisation) and those in the Dow Jones Industrial Average index. We compare (for this period) the mark-ups (as measured by Aghion et al. (2008)) as proxied for by the relative profitability (as measured by Return on Equity (ROE) and Return on Invested Capital (ROIC)). We also compare a set of commonly used ratios for SA firms relative to their US, UK and Brazilian counterparts for the period 1994{2013. Our results for both data sets do not confirm the claim that South African industrial companies have enjoyed sharply higher mark-ups as approximated by the relevant rates of profitability when compared with their international counterparts.
    Keywords: competitiveness, profitability margin, return on equity, return on assets, return on invested capital, mark-ups, profit margins, gross margins
    JEL: L25 L10
    Date: 2015
  8. By: Holden , Stein (School of Economics and Business, Norwegian University of Life Sciences); O’Donnell, Christopher J. (School of Economics, The University of Queensland, Australia)
    Abstract: We make cross-sectional comparisons of productivity in a risky agricultural setting. To make meaningful comparisons, we find it necessary to define a new productivity index that satisfies important axioms from index number theory (e.g., transitivity). The index can be computed without any information on output or input prices. However, it cannot be computed without an estimate of a state-contingent production frontier. We use maximum likelihood methods to estimate a state-contingent stochastic production frontier that explicitly allows for variations in input quality. We find that differences in productivity are mainly due to differences in environment and scale-mix efficiency. In turn, we conjecture that differences in scale-mix efficiency are partly driven by variations in access to input subsidies. The maximum likelihood estimator appears to do a poor job of disentangling the effects of technical inefficiency and statistical noise.
    Keywords: agricultural productivity; risky environment; imperfect factor markets; state-contingent analysis; total factor productivity; input subsidies
    JEL: C40 O13 Q10
    Date: 2015–03–12
  9. By: Dokken, Therese (School of Economics and Business, Norwegian University of Life Sciences); Angelsen, Arild (School of Economics and Business, Norwegian University of Life Sciences)
    Abstract: An emerging body of knowledge has established that poorer households in forest adjacent communities in developing countries are generally more forest reliant (higher forest income share) while richer households tend to extract more and generate higher absolute forest income. These studies commonly categorize households based on observed income in cross-section data, presenting a snap-shot reflecting both inter-household and inter-annual income variation. In this paper we introduce a new approach to categorize households based on a combination of the observed one-year income and predicted income by an augmented asset approach. Applying this approach on household data from Tanzania, we find forest reliance to be high among structurally poor households (low observed income and assets). The highest forest reliance is, however, found among the stochastically non-poor households (high observed income and low assets), and this group also has the highest absolute forest income.
    Keywords: Forest dependence; poverty categories; asset poverty; cross-sectional data
    JEL: C53 I32 Q23
    Date: 2015–03–13
  10. By: Ghazouani, W.; Molle, F.; Swelam, A.; Rap, E.; Abdo, A.
    Keywords: Case studies; Profitability; Cost benefit analysis; Pumps; Drainage water; Food security; Irrigated farming; Irrigation water; Yields; Crop management; Conflict; Adaptation; Farmers; Canals; Deltas; Water availability; Water scarcity
    Date: 2014
  11. By: Marchetta, Francesca (CERDI, University of Auvergne); Sahn, David E. (Cornell University)
    Abstract: This paper examines the role of education and family background on age at marriage, age at first birth, and age at labor market entry for young women in Senegal using a rich individual-level survey conducted in 2003. We use a multiple-equation framework that allows us to account for the endogeneity that arises from the simultaneity of the decisions that we model. Differences in the characteristics of the dependent variable informed the choice of the models that are used to estimate each equation: an ordered probit model is used to analyze the number of completed years of schooling, and a generalized hazard model for the other three decisions. Results show the importance of parental education, especially the father, on years of schooling. We find that each additional year of schooling of a woman with average characteristics delays marriage and the age at first birth by 0.5 and 0.4 years, respectively. Parents' education also reduces the hazard of marriage and age of first birth, while the death of parents has just the opposite effect, with the magnitudes of effects being larger for mothers. Delaying marriage also leads to an increase in the hazard of entering the formal labor market, as does the education and death of the women's parents.
    Keywords: multiple equations, duration models, unobserved heterogeneity, Senegal
    JEL: J12 J13 C3
    Date: 2015–02

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