nep-afr New Economics Papers
on Africa
Issue of 2016‒04‒16
five papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Institutions, Foreign Direct Investment, and Economic Growth in North African Countries By Mhamed ali Khemakhem; zouheir abida
  2. Periodically Collapsing Bubbles in the South African Stock Market By Mehmet Balcilar; Rangan Gupta; Charl Jooste; Mark Wohar
  3. Economic Consequences of Forced Displacement By Fiala, Nathan
  4. Engel’s equivalence scales: Theory and practice By Luca Tiberti; Abdelkrim Araar; Jean claude Nsabimana
  5. Trusting Former Rebels: An Experimental Approach to Understanding Reintegration After Civil War By Bauer, Michal; Fiala, Nathan; Levely, Ian

  1. By: Mhamed ali Khemakhem (Faculty of Economics and Management of Sfax); zouheir abida (Faculty of Economics and Management of Sfax)
    Abstract: This contribution investigates the causal interactions between foreign direct investment (FDI), economic freedom and economic growth in a panel of 4 countries of North Africa (Tunisia, Morocco, Algeria and Egypt), and 5-year periods from 1980 to 2013. Using System Generalized Method of Moment (GMM) panel data analysis, we find strong evidence of a positive link between FDI and economic growth. We also find evidence that economic freedom appear to be working as a complement to FDI and, moreover, that the effect of FDI is more pronounced in the presence of the economic freedom variable. This means the countries promote greater freedom of economic activities gain significantly from the presence of multinational corporations (MNCs).
    Keywords: Foreign direct investment, Economic freedom, Economic growth
    JEL: F21 O43 C23
  2. By: Mehmet Balcilar (Department of Economics, Eastern Mediterranean University, Turkey and Department of Economics, University of Pretoria, South Africa.); Rangan Gupta (Department of Economics, University of Pretoria); Charl Jooste (Department of Economics, University of Pretoria); Mark Wohar (Department of Economics, University of Nebraska-Omaha, USA and Loughborough University, UK)
    Abstract: This paper studies the existence and timing of bubbles in South Africa’s stock market. An empirical model of bubble formation is tested against three competing models of asset price returns that rule out the existence of bubbles. The model controls for nonlinearities inherent in asset price returns by allowing for the existence of multiple regimes. The regimes are all related to the size of the bubble and allows for a bubble to persist and survive over a significant period of time – as was observed with the housing market before the financial crisis in 2008/09. Two regimes are identified – a bubble survival regime and a bubble collapse regime. The bubble model fits the data better than the competing models and suggests that the formation and existence of periodically collapsing bubbles are a reality. The model identifies probabilities of survival and collapses that are directly related to the size of the bubble relative to the fundamental price of the stock market. The results show that stock market returns ought to decrease as the size of the bubble grows, which could burst the bubble and cause a collapse in the stock exchange – far below the correction required to return to equilibrium.
    Keywords: Bubbles, Regime Switching, Collapse, JSE
    JEL: C12 C22 G12
    Date: 2016–03
  3. By: Fiala, Nathan (University of Connecticut)
    Abstract: Microenterprises are a major contributor to income and employment in developing countries. There is growing evidence though that they do not expand beyond their intitial start-up point. I present the results of a randomized experiment with microenterprise owners in Uganda designed to explore the constraints to this growth. Business owners were randomly selected to receive loans, cash grants, business skills training, or a combination of these programs. I find that men with access to loans and training report significantly higher profits. The loan-only intervention had some initial impact, but this does not last. There are no impacts from the grant intervention, and no effects for women from any of the interventions. While recent research has found little effect from microfinance, I argue this is because men are not included in the studies. The results from this experiment suggest that male owned businesses can expand from microfinance.
    Keywords: Economic development, microenterprises, microfinance, cash grants, entrepreneurship training, credit constraints
    JEL: O12 O16 C93 J16 L26 M53
    Date: 2014–09
  4. By: Luca Tiberti; Abdelkrim Araar; Jean claude Nsabimana
    Abstract: The Engel’s approach is largely used to estimate equivalence scales. In this paper, we start by recalling the theoretical framework of this approach as well as the econometric methods which are usually adopted to estimate the Engel’s scales. We point out the different elements that may largely influence the estimated equivalence scales. Also, we discuss some possible pitfalls and how certain country contexts can lead to equivalence scale estimations which violate Engel's laws. For instance, this can be the case where extreme poverty is widespread. We show how the choice of the minimum expenditure threshold, the model’s specification, the demographic characteristics of the reference household and the reference age group can all substantially modify estimates of equivalence scales. The issues are illustrated using household data from Burundi and Mali.
    Keywords: equivalence scales; Engel’s curves; household welfare; Burundi, Mali
    JEL: D12 D63 I31 J12
    Date: 2015
  5. By: Bauer, Michal (CERGE-EI); Fiala, Nathan (University of Connecticut); Levely, Ian (Charles University in Prague)
    Abstract: We use a set of experiments to study the effects of forced military service for a rebel group on social capital. We examine the case of Northern Uganda, where recruits did not selfselect nor were systematically screened by rebels. We find that individual cooperativeness robustly increases with length of soldiering, especially among those who soldiered during early age. Parents of ex-soldiers are aware of the behavioral difference: they trust exsoldiers more and expect them to be more trustworthy. These results suggest that the impact of child soldiering on social capital, in contrast to human capital, is not necessarily detrimental.
    Date: 2014–09

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