nep-afr New Economics Papers
on Africa
Issue of 2016‒11‒13
eight papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Cities and Agricultural Transformation in Africa: Evidence from Ethiopia By Vandercasteelen, Joachim; Tamru, Seneshaw; Minten, Bart; Swinnen, Johan
  2. Debt Financing and Post-Privatization Performance of Firms: The Case of Nigerian Listed Firms By Usman, Ojonugwa; Uwadiegwu, Ihedioha O.; Olorunmolu, Joseph O.
  3. Aid and Growth in Malawi By Daniel Chris Khomba; Alex Trew
  4. Do input subsidies crowd in or crowd out other soil fertility management practices? Panel survey evidence from Zambia By Levine, N. Kendra; Mason, Nicole M.; Morgan, Stephen N.
  5. Efficient Corruption? Testing the hypothesis in African countries By Kouramoudou Keita; Hannu Laurila
  6. Economic Partnership Agreements and the Complex Framework of Regional Integration in Africa By Marinov, Eduard
  7. From Corn to Popcorn? Urbanization and food consumption in Sub-Sahara Africa: Evidence from rural-urban migrants in Tanzania By Cockx, Lara; De Weerdt, Joachim
  8. Forecasting the Probability of Recessions in South Africa: The Role of Decomposed Term-Spread and Economic Policy Uncertainty By Goodness C. Aye; Christina Christou; Luis A. Gil-Alana; Rangan Gupta

  1. By: Vandercasteelen, Joachim; Tamru, Seneshaw; Minten, Bart; Swinnen, Johan
    Abstract: Due to the rapid growth of cities in Africa, a larger number of farmers is living in the rural hinterland providing food to urban residents. However, empirical evidence on how urbanization affects these farmers is scarce. To fill this gap, this paper explores the relationship between proximity to a city and the production behavior of rural staple crop producers. More in particular, we analyze unique data from teff producing farmers in major producing areas around Addis Ababa, the Ethiopian capital. We find that farmers more closely located to Addis Ababa face higher wages and land rental prices, but because they receive higher teff prices they have better incentives to intensify production. Moreover, we observe that modern input use, land and labor productivity, and profitability in teff production improve with urban proximity. There is a strong and significant direct effect of urban proximity, which is suggested to be related with more use of formal factor markets, less transaction costs, and better access to information. In contrast, we do not find strong and positive relationships of rural population density increases - as an alternative source of agricultural transformation - as they seem to lead to immiserizing effects in these settings. Our results show that urban proximity should be considered as an important determinant of the process of agricultural intensification and transformation in developing countries.
    Keywords: Agricultural Transformation, Crop Intensification, Urbanization, Cities, Ethiopia, Sub Saharan Africa, Community/Rural/Urban Development, Crop Production/Industries,
    Date: 2016–09
  2. By: Usman, Ojonugwa; Uwadiegwu, Ihedioha O.; Olorunmolu, Joseph O.
    Abstract: This study examines the impact of debt financing on the performance of privatized-firms in Nigeria. The study uses a panel data obtained from the Nigerian Stock Exchange and Securities and Exchange Commission during the period 2002-2009. Our Ordinary Least Square (OLS) results suggest that corporate financing through debt tends to increase post-privatization performance of firms up to a given level, after which any addition to the proportion of debt in the capital (assets) of firms reduces their performance. The result also finds that the optimum debt financing to capital (assets) of privatized firms are 34.3%, 32.4% and 38.3%. Therefore, the study recommends among others the need for the firms to maintain optimum ratio of debt financing to capital of the privatized firms in Nigeria.
    Keywords: Debt financing, Firm performance, Capital Structure, Post-privatization, Nigeria
    JEL: G38
    Date: 2015–12
  3. By: Daniel Chris Khomba (University of St Andrews); Alex Trew (University of St Andrews)
    Abstract: We study the impact on the growth of foreign aid flows to districts in Malawi over the period 2000–13. To isolate a causal impact on growth, we employ two exogenous determinants of within-country aid disbursement: First, the ethnic affinity of a district with the sitting President; second, the portion of Parliamentarians in a district that are susceptible into induced political defections. Using these instru- ments, alone or together, we identify a robust and quantitatively significant role for aid flows in causing higher growth in light density. We find a hump-shaped growth response over the course of three years. Bilateral aid appears to be better in causing growth than multilateral aid while grants have more impact than loans.
    Keywords: Foreign aid, economic development, favoritism
    JEL: F35 O19 O55 R11
  4. By: Levine, N. Kendra; Mason, Nicole M.; Morgan, Stephen N.
    Abstract: In many countries in sub-Saharan Africa, low crop yield response to inorganic fertilizer contributes to low profitability of fertilizer use and reduces the positive effects of and returns to input subsidy programs (ISPs). A major reason for poor crop yield response to fertilizer is low soil quality. However, using other soil fertility management (SFM) practices in conjunction with fertilizer can improve its response rate. But do ISPs encourage (‘crowd in’) or discourage (‘crowd out’) the use of such SFM practices? Using nationally representative household panel survey data, we estimate the effects of subsidized fertilizer acquired through Zambia’s ISP on the use of several SFM practices: (i) leaving land fallow, (ii) intercropping, and (iii) applying animal manure. For each practice, we estimate the household-level effects of an increase in the quantity of subsidized fertilizer acquired on the probability of SFM adoption, land area covered by SFM, and the share of land dedicated to SFM, using the ordinary least squares, fixed effects, and fixed effects-instrumental variable estimators. The results suggest that subsidized fertilizer has statistically significant crowding out effects on all fallow variables, for all measures of adoption, using all estimators. Additionally, we find some evidence that subsidized fertilizer crowds out intercropping. However, the weight of the evidence suggests that subsidized fertilizer has no significant effect on intercropping with legumes or the use of animal manure. By disincentivizing fallowing and intercropping, Zambia’s ISP may be inadvertently reducing soil quality and the effectiveness and profitability of its main input, inorganic fertilizer.
    Keywords: Environmental Economics and Policy, Land Economics/Use, Productivity Analysis,
    Date: 2016–09
  5. By: Kouramoudou Keita; Hannu Laurila (School of Management, University of Tampere)
    Abstract: The paper is an econometric study of the economic effects of corruption in African countries. In economic literature, the mainstream view is that corruption is plainly detrimental (the Sanding the Wheels Hypothesis, SWH). Still, efficient corruption gains considerable support, too, particularly in the context of bad governance (the Greasing the Wheels Hypothesis, GWH). In this paper, the effects of corruption on Gross Domestic Product (GDP per capita) and investments (Investment to GDP Ratio) are estimated with respect to several indicators that measure the quality of governmental and social institutions. The paper finds substantial proof for GWH. Corruption enhances economic growth in countries suffering from problems in public management, business environment, infrastructure, or rural sector. Corruption fosters investments in countries encountering shortcomings in terms of safety and legislation, or political participation and human rights. Corruption has positive effects on both growth and investments, if public health, social welfare, or education are flawed by bad institutions. To sum up, while SWH holds in the big picture, GWH is also valid for many African economies with depressing socioeconomic conditions. Therefore, efforts should be put rather on reinforcing institutions than on plain battle against corruption.
    Keywords: corruption, growth, institutions, investments
    JEL: D73
    Date: 2016–01
  6. By: Marinov, Eduard
    Abstract: The article briefly presents the concept and framework of regional integration in Africa. It then discusses the principles, history, and current state of negotiations to disclose the effects of EPAs on regional integration efforts in Africa. Then it analyses the trends in international trade relations between the EU and the five EPA regions in Africa for the period 2003-2013, aiming to assess if EPAs have the envisaged positive impact on trade for both the EU, the EPA regions and the participating countries. The analysis includes the direction, dynamics and commodity structure of EU trade with African EPA regions. As a conclusion, the paper presents some general questions posed by the analysis on the future development of EPAs and the trade policy of the EU towards Sub-Saharan African countries.
    Keywords: Economic partnership agreement, EPA regions, regional integration in Africa, EU-Africa trade
    JEL: F13 F15 F50 F55
    Date: 2016
  7. By: Cockx, Lara; De Weerdt, Joachim
    Abstract: Sub-Saharan Africa is currently in the midst of an unprecedented wave of urbanization that is expected to have wide-ranging implications for food and nutrition security. Though this spatial transformation of the population is increasingly put forward as one of the main drivers of changes in food consumption patterns, empirical evidence remains scarce and the comparative descriptive design of existing research is prone to selection bias as urban residence is far from random. Based upon unique longitudinal data from the Tanzania National Panel Survey and the Kagera Health and Development Survey, this study will be the first to assess the impact of urbanization on food consumption through comparing individuals’ food consumption patterns before and after they have migrated from rural to urban areas. We find that even after controlling for individual fixed heterogeneity, baseline observable characteristics and initial household fixed effects, urbanization is significantly associated with important changes in dietary patterns, including a shift away from traditional staples towards more processed and ready-to-eat foods. While there is some evidence of changes that can be deemed beneficial from a nutritional point of view - including increased consumption of vegetables and animal source foods - the results also largely confirm concerns about the association between urbanization and heightened consumption of sugar and fats. In addition, we find no support for the hypothesis that urbanization is associated with more diverse diets. Finally, the results clearly indicate that rural-urban migration significantly contributes to reducing volatility in food consumption.
    Keywords: Community/Rural/Urban Development, Crop Production/Industries, Food Consumption/Nutrition/Food Safety,
    Date: 2016–09
  8. By: Goodness C. Aye (Department of Economics, University of Pretoria, South Africa); Christina Christou (School of Economics and Management, Open University of Cyprus, Cyprus); Luis A. Gil-Alana (Universidad de Navarra, Faculty of Economics and Business Administration, Spain); Rangan Gupta (Department of Economics, University of Pretoria, South Africa)
    Abstract: This paper extends the vast literature forecasting the probability of recession by including the different components of the term spread, namely the expectation and the term premium components obtained from a fractional integration approach. We also augment these with the economic policy uncertainty index. We use 10 specifications of the probit prediction model and quarterly data from South Africa covering the period 1990:1 to 2012:1 for analyses. Our out-of-sample results show that the model that incorporates the expectation component of the yield spread in addition to economic policy uncertainty provides the best forecast of recession in South Africa. All three recession periods in our sample were accurately dictated by the prediction models and the best forecast occurred at the four quarters ahead horizon. These results were also robust to the full sample prediction
    Keywords: Expected term spread; term premium; economic policy uncertainty; recession; out-of-sample forecast; Probit model
    JEL: C25 E37 E44 E52 E62
    Date: 2016–11

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