nep-afr New Economics Papers
on Africa
Issue of 2015‒12‒08
four papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. FOREIGN AID AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICA By Lauren Tait; Abu Siddique; Ishita Chatterjee
  2. Structural and institutional determinants of investment activity in Africa By Chuku, Chuku; Onye, Kenneth; Ajah, Hycent
  3. Debt Sustainability in Sub-Saharan Africa: Unraveling Country-Specific Risks By Bill Battaile; F. Leonardo Hernández; Vivian Norambuena
  4. Reducing prejudice through actual and imagined contact: A field experiment with Malawian shopkeepers and Chinese immigrants By Gu, Jun; Mueller, Annika; Nielsen, Ingrid; Shachat, Jason; Smyth, Russell

  1. By: Lauren Tait (Business School, University of Western Australia); Abu Siddique (Business School, University of Western Australia); Ishita Chatterjee (Business School, University of Western Australia)
    Abstract: Since the end of the Second World War, developing countries have been the recipient of significant amounts of foreign aid, provided mainly with the aim of easing poverty and promoting economic growth and development. Sub-Saharan Africa, a region of forty-eight countries with a combined population of over nine hundred million as of 2013, has consistently been one of the largest recipients of foreign aid. For example, in 2012, the region received a share of over twenty five per cent of total world aid. As such, the effectiveness of aid in Sub-Saharan Africa is of particular interest to researchers and both donor and recipient countries alike. The main objective of this study is to empirically examine the impact of foreign aid on this region over the period 1970 to 2012, through fixed effect panel data analysis. A sample of twenty-five Sub-Saharan African countries is considered in the study. The findings of the study indicate that aid has a significant positive long-term impact on per capita GDP growth over the period under consideration. This significant positive effect of aid is not subject to diminishing marginal returns, nor is conditional on the level of freedom in the country. Furthermore, upon sectoral decomposition of aid commitments, certain sectors are identified as having a more significant impact on growth over the sub-period 1995 to 2012. Aid designated for social infrastructure, in particular education and health, and general budget support has a positive, significant impact on growth. Given the shorter time frame, these results are not as robust as those for the 1970 to 2012 period, but nonetheless provide a unique insight into the effect of sector-earmarked aid on growth in Sub-Saharan Africa, as well as guidance for aid allocation policy-makers.
    Date: 2015
  2. By: Chuku, Chuku; Onye, Kenneth; Ajah, Hycent
    Abstract: This paper considers the structural and institutional determinants of investment activity in selected African countries within a neoclassical framework. Generalized method of moments and a family of panel data estimation techniques are utilized in addition to nonparametric kernel regression techniques to uncover the relationship. Three main findings emerge; (i) financial openness and institutional quality are reasonably robust structural and institutional determinants of investment activity in Africa respectively, (ii) there is evidence of nonlinearity in the relationship and there exist a threshold level of financial openness that achieves the highest level of investment, (iii) using interaction terms, the inhibiting effect of financial openness is potentially less in countries with higher levels of institutional quality, (iv) promoting institutional quality is an effective policy towards facilitating investment activity in Africa.
    Keywords: Investments, financial openness, institutional quality, nonparametric regression, GMM
    JEL: E22 O13 Q18
    Date: 2015
  3. By: Bill Battaile; F. Leonardo Hernández; Vivian Norambuena
    Abstract: Sub-Saharan African countries as a group showed a considerable reduction in public and externalindebtedness in the early 2000s as a result of debt relief programs, higher economic growth and improved fiscal management for some countries. More recently, however, vulnerabilities in some countries are on the rise, including a few with very rapid debt accumulation. This paper looks at the heterogeneous experiences across Sub-Saharan African countries and the detailed dynamics that have driven changes in public debt since the global financial crisis. Borrowing to support fiscal deficits since 2009, including through domestic markets and Eurobond issuance, has driven a net increase in public debt for all countries except oil exporters benefitting from buoyant commodity prices and fragile states receiving post-2008 HIPC relief. Current account deficits and FDI inflows drove the external debt dynamics, with high balance of payments problems associated with very rapid external debt accumulation in some cases. Pockets of increasing vulnerabilities of debt financing profiles and sensitivity of debt burden indicators to macro-fiscal shocks require close monitoring. Specific risks that policy-makers in Sub-Saharan Africa need to pay attention to going forward include the recent fall in oil prices, the slowdown in China and the sluggish recovery in Europe, dependence on non-debt creating flows and accounting for contingent liabilities.
    Date: 2015–11
  4. By: Gu, Jun; Mueller, Annika; Nielsen, Ingrid; Shachat, Jason; Smyth, Russell
    Abstract: We examine the ability of intergroup contact to ameliorate the effect of in-group bias on economic outcomes. Specifically, we employ randomized experiments to test whether actual and imagined contact is effective in reducing prejudice between indigenous Malawian shopkeepers (in-group), and their Chinese immigrant counterparts (out-group), and test the stability of these changes over time. We find differing results with actual contact. Local Malawians´ attitude towards Chinese migrants did not improve, but their willingness to spend time did. In contrast, actual contact spurred improvement in the Chinese migrants´ attitude toward local Malawians, but did not increase their willingness to spend time with them. These effects persisted over a time period of at least ten days. Imagined contact had no impact on Malawians´ attitude or behavioral intention with respect to Chinese migrants
    Keywords: Chinese migrants in Africa,actual contact,imagined contact,prejudice,field experiment
    JEL: C93 J15
    Date: 2015

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