nep-afr New Economics Papers
on Africa
Issue of 2016‒12‒18
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance By Simplice Asongu; Jacinta Nwachukwu
  2. Economic Transformation in Africa from the Bottom Up: Evidence from Tanzania By Xinshen Diao; Josaphat Kweka; Margaret McMillan
  3. Structural transformation to boost youth labour demand in Sub-Saharan Africa : the role of agriculture, rural areas and territorial development By Losch, Bruno
  4. Technical note Proposed model for regional power sector integration in Africa By Amy Rose; Ignacio Pérez-Arriaga
  5. Concession Stands: How Foreign Investment Incites Protest in Africa By Darin Christensen
  6. Mining and economic development: Did China’s WTO accession affect African local economic development? By Tony Addison; Amadou Boly; Anthony Mveyange

  1. By: Simplice Asongu (Yaoundé/Cameroun); Jacinta Nwachukwu (Coventry University, UK)
    Abstract: This study investigates the effect of governance on capital flight by bundling and unbundling governance. The empirical evidence is based on 37 African countries for the period 1996-2010 and the Generalised Method of Moments. Governance is bundled by principal component analysis, namely: (i) political governance from political stability and ‘voice and accountability’; (ii) economic governance from government effectiveness and regulation quality and (iii) institutional governance from corruption-control and the rule of law. The following findings are established. (i) Political stability and ‘voice and accountability’ reduce capital flight while the collective effect of political governance is not significant. (ii) Economic governance increases capital flight whereas the individual effects of regulation quality and government effectiveness are not significant. (iii) Corruption-control and institutional governance negatively affect capital flight whereas the impact of the rule of law is not significant. (iv) Taken together, Corruption-control is the most effective governance weapon in the fight against capital flight. (v) Priority in the Washington Consensus is more effective at fighting capital flight compared to the Beijing Model. Policy implications are discussed.
    Keywords: Econometric modelling; Capital flight; Governance; Africa
    JEL: C50 E62 F34 O55 P37
    Date: 2016–04
  2. By: Xinshen Diao; Josaphat Kweka; Margaret McMillan
    Abstract: At roughly 4% per annum, labor productivity in Tanzania has grown more rapidly over the past 12 years than at any other time in recent history. Employment growth has also been strong keeping up with population growth at roughly 2.5 percent per annum; the bulk of employment growth (90%) has been in the non-agricultural sector. However, the vast majority of this non-agricultural employment growth has occurred in the informal sector. Using Tanzania’s first nationally representative survey of micro, small and medium sized enterprises - we show that firms in the informal sector contributed roughly half a percentage point to economy-wide labor productivity growth in Tanzania between 2002 and 2012. However, virtually all of the labor productivity growth contributed by informal firms came from a small subset of firms we call the in-between firms. We consider attributes of the in-between firms that could be used for targeting financial and business services to firms with the potential to grow. We find two salient characteristics of firms in the in-between sector that might lend themselves to targeting – their owners are more likely to keep written accounts and they are more likely to keep their savings in formal bank accounts.
    JEL: O4 O55
    Date: 2016–12
  3. By: Losch, Bruno
    Abstract: This paper explores the opportunities that economic diversification offers to foster structural transformation in sub-Saharan Africa while absorbing the growing youth labour force and providing them with the requisite skills.
    Keywords: youth employment, structural adjustment, agriculture, rural area, development policy, rural development, Africa south of the Sahara
    Date: 2016
  4. By: Amy Rose; Ignacio Pérez-Arriaga
    Abstract: Regional power pools present a significant and potentially defining opportunity for African power systems to develop domestic energy resources, improve system reliability, and contribute to overall economic development. Hydropower is expected to play a significant role in many regional power pools in Africa. Feasible power transmission highways from Grand Inga in the Democratic Republic of the Congo and the Grand Renaissance Dam in Ethiopia to other regions on the continent create the possibility of a pan-African electricity grid. However, in the medium and long term, global climate change is expected to cause major variations in Africa’s hydrological resources and it is not known how these changes may impact the value of regional power sector integration. This paper presents a model developed to study the value of different levels of regional integration in sub-Saharan Africa and how this value may change in the face of climate change. This work builds on previous studies by incorporating the ability to trade between different regional pools, co-optimisation of generation and transmission, the ability to share reserves, and detailed simulation of the major hydropower basins in Africa. Numerical results of the analysis will be presented in a parallel paper.
    Keywords: climate change, capacity expansion planning, power pools, Africa
  5. By: Darin Christensen (UCLA)
    Abstract: Why do foreign investments that can improve economic welfare also induce protest? Using a newly compiled dataset on commercial mining, commodity prices, and protest in Africa, I first establish that foreign investment projects increase the probability of protest. I then develop a theoretical model to explain these conflicts. I argue that communities have to strike a bargain with companies but have limited information about the value of the project they are hosting. When communities’ expectations exceed what companies are willing to pay, protests result. I marshal two pieces of empirical evidence consistent with this model: first, protests are more likely when mineral prices are elevated and, thus, communities hold inflated expectations about mining projects’ margins; and second, this relationship between mineral prices and protests is mitigated by policies that increase transparency and, thus, help correct the informational asymmetry that generates conflict. I do not find empirical support for common alternative explanations for protest related to environmental risks, in-migration, inequality within mining communities, corruption, or reporting bias. Despite claims that resource extraction fuels armed conflict, I also do not find that these commercial mining projects increase the likelihood of rebel activity at or near mine sites. The conflicts we observe in mining communities are better understood as a consequence of conflictual bargaining over profits than instances of predation by insurgents.
    Keywords: Violence, Geography, Economic Development, Africa
    JEL: D74 F63
    Date: 2016–11
  6. By: Tony Addison; Amadou Boly; Anthony Mveyange
    Abstract: This paper investigates China’s influence on local economic development in 37 African countries between 1997 and 2007. We compare the average changes in economic growth, migration, spatial inequality, and welfare of mineral-rich districts, both prior and after China’s WTO Accession, to the corresponding changes in districts without any mineral endowment. Using this exogenous variation, we show that during 2002–07, mining activities in response to the global commodity price-boom increased welfare as measured by spatial Sen Index but were insignificant for local economic growth, migration, and spatial inequality. Our findings suggest that policy needs to do more to improve the local benefits of positive external shocks (such as China’s WTO Accession): it is not enough to assume, given Africa’s high spatial inequality, that local economies will automatically benefit from higher national growth.
    Keywords: mining, commodity boom, local development, Africa, China, WTO

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