nep-afr New Economics Papers
on Africa
Issue of 2015‒07‒18
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Trade Openness, Structural Transformation, and Poverty Reduction: Empirical Evidence from Africa By Kelbore, Zerihun Getachew
  2. Resource Discovery and Conflict in Africa: What Do the Data Show? By Rabah Arezki; Sambit Bhattacharyya; Nemera Mamo
  3. Economic Globalization: Boon or Bane for African Health? By Vishalkumar Jani; Dholakia, Ravindra H.
  4. Mining and Local Corruption in Africa By Kotsadam, Andreas; Olsen, Eivind Hammersmark; Knutsen, Carl Henrik; Wig, Tore
  5. Commodity dependence and price volatility in least developed countries: A structuralist computable general equilibrium model with applications to Burkina Faso, Ethiopia and Mozambique By Von Arnim, Rudi; Tröster, Bernhard; Staritz, Cornelia; Raza, Werner
  6. The Implication of European Union’s Food Regulations on Developing Countries: Food Safety Standards, Entry Price System and Africa’s Export By Kareem, Fatima Olanike; Brümmer, Bernhard; Martinez-Zarzoso, Inmaculada
  7. Social network effects on mobile money adoption in Uganda By Murendo, Conrad; Wollni, Meike; de Brauw, Alan; Mugabi, Nicholas

  1. By: Kelbore, Zerihun Getachew
    Abstract: This paper examines the poverty reduction effects of trade openness and structural transformation in Africa. The study uses a panel data covering the period from 1981 to 2010 and constituting 43 African countries. Using System generalized methods of moments, findings show that trade openness initially exacerbates poverty by about 1.3% and after one period lag, it reduces it by about 1.2%. Structural transformation lagged two periods, on the other hand, led to poverty reduction of about 3%. Further, the results show that infrastructure development and fostering the participation of the private sector in the continent greatly contribute towards poverty reduction. The study also confirms the famous 'Bhagwati hypothesis' that growth is good for the poor, as an increase in GDP per capita found to have a proportionate reduction in poverty levels (0.7 to 1%). The study also investigated the causality between trade openness and structural transformation, and the results demonstrated that there is a bi-causality relationship between the two variables. As a robustness check, the results were validated using fixed effects, random effects, and panel vector auto regression (PVAR) models. Thus, the implication is that despite the initial costs inflicted on the poor, African economies need to focus on reforms that help them achieve structural transformation in its broader sense and boost international trade.
    Keywords: Trade openness, structural transformation, Poverty, GMM, Africa
    JEL: C13 F1 F14 O1 O43
    Date: 2015–06–15
  2. By: Rabah Arezki; Sambit Bhattacharyya; Nemera Mamo
    Abstract: The empirical relationship between natural resources and conflict in Africa is not very well understood. Using a novel geocoded dataset on resource discovery and conflict we are able to construct a quasi-natural experiment to explore the causal effect of (giant and major) oil and mineral discoveries on conflict in Africa at the grid level corresponding to a spatial resolution of 0.5 x 0.5 degree covering the period 1946 to 2008. Contrary to conventional wisdom, we find no evidence of natural resources triggering conflict in Africa after controlling for grid-specific fixed factors and time varying common shocks. Resource discovery appears to have improved local income measured by nightlights which could be reducing the conflict likelihood. We observe little or no heterogeneity in the relationship across resource type, size of discovery, pre and post conclusion of the cold war, and institutional quality. The relationship remains unchanged at the regional and national levels.
    Keywords: Resource discovery; Conflict onset; Conflict incidence; Conflict intensity
    JEL: D72 O11
    Date: 2015
  3. By: Vishalkumar Jani; Dholakia, Ravindra H.
    Abstract: The effect of globalization, especially economic liberalization, on socioeconomic development has long been debated in development economics. There is a view that globalization is not beneficial to the underdeveloped and developing world. Africa is always put forward as an example. So it is important to see what is really the impact of international integration and increasing trade on countries of Africa. Evidence for this is very limited and inconclusive. The present study attempts to decipher how health status of African countries is impacted by the economic liberalization. It aims to bridge the gap between the two strands of literature: (i) impact of economic liberalization on growth, and (ii) effect of economic growth on health status. The findings show a positive effect of globalization on the health status of African countries with those having lower income and underdeveloped status in initial period benefiting more.
  4. By: Kotsadam, Andreas (Dept. of Economics, University of Oslo); Olsen, Eivind Hammersmark (Dept. of Economics, University of Oslo); Knutsen, Carl Henrik (Department of Political Science, University of Oslo); Wig, Tore (Department of Political Science, University of Oslo)
    Abstract: We investigate whether mining affects local-level corruption in Africa. Several cross-country analyses report that natural resource production and wealth have adverse effects on political institutions, for instance by increasing corruption, whereas other country-level studies show no evidence of such "political resource curses". These studies face well-known endogeneity and other methodological issues, and employing alternative designs and micro-level data would allow for drawing stronger inferences. Hence, we connect 90,000 survey respondents in four Afrobarometer survey waves to spatial data on about 500 industrial mines. Using a difference-in-differences strategy, we find evidence that mining increases bribe payments. Mines are initially located in less corrupt areas, but mining areas turn more corrupt after mines open and actively produce. A closer study of South Africa - using even more precise spatial matching of mines and survey respondents - corroborates the continent-wide results. Hence, mineral production is, indeed, a "curse" to local institutions.
    Keywords: Resource curse; corruption; minerals; mining
    JEL: D73 Q32 Q33
    Date: 2015–04–30
  5. By: Von Arnim, Rudi; Tröster, Bernhard; Staritz, Cornelia; Raza, Werner
    Abstract: Many least developed countries (LDCs) face commodity dependence on the export and import side. This paper develops a structuralist computable general equilibrium model for commodity-dependent LDCs and simulates global commodity price shocks for Burkina Faso, Ethiopia and Mozambique. Results show important macroeconomic and distributional effects. Although increasing export commodity prices are beneficial, the high correlation with import commodity prices causes low or even negative combined effects. The magnitude of effects depends on the economic structure, the degree of import and export dependence, the production structure of the key commodity sectors and the distribution of windfall profits.
    Keywords: Commodity Dependence,Price Volatility,Sub-Saharan Africa
    Date: 2015
  6. By: Kareem, Fatima Olanike; Brümmer, Bernhard; Martinez-Zarzoso, Inmaculada
    Abstract: We examine the impact of two important non-tariff measures presumed to simultaneously affect firms’ decisions to export to the European Union (EU). As a novelty to the literature, we analyse the impacts of EU pesticide standards on African exports alongside a complementary non-tariff measure in the form of a minimum entry price control measure which aims to protect EU growers of certain fruits and vegetables against international competition. We represent these trade costs in the context of a Melitz firm heterogeneity framework using Helpman, Melitz and Rubenstein (2008) method. Analysis was based on Africa’s exports of tomatoes to the EU from 2008 to 2013, using the gravity model of trade. Our results show that at both the extensive and intensive margins of trade, the high stringency of EU pesticide standard prevents new entry into the EU market, drives less productive firms away, and discourages existing exporters from expanding their market base. Furthermore, we find the EU entry price system acts like an export tax, inhibiting tomatoes export to the EU, but only at the intensive margin.
    Keywords: EU food regulations, Pesticide standards, Entry price control, African exports, Gravity model, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, International Development, International Relations/Trade, C13, C33, F10, F13,
    Date: 2015–02
  7. By: Murendo, Conrad; Wollni, Meike; de Brauw, Alan; Mugabi, Nicholas
    Abstract: Social networks play a vital role in generating social learning and information exchange that can drive the diffusion of new financial innovations. This is articularly relevant for developing countries where education, extension and financial information services are underprovided. The recent introduction of mobile money in Africa represents a case where imperfect financial markets, weak extension services and information asymmetries limit the ability of rural households to make informed decisions to take advantage of mobile money innovation. This article identifies the role of social networks in the adoption of mobile money in Uganda. Using data from a survey of 477 rural households, a probit model is estimated controlling for household characteristics, correlated effects, and other possible information sources. Results suggest that learning within social networks helps disseminate information about mobile money and has enhanced its adoption. Compared to poor households, non-poor households rely more on social networks for information about mobile money. Mobile money adoption is likely to be enhanced if promotion programs reach more social networks.
    Keywords: social networks, mobile money, adoption, Uganda, International Development, Research and Development/Tech Change/Emerging Technologies, D14, D83, O33, Q12,
    Date: 2015–02

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