nep-afr New Economics Papers
on Africa
Issue of 2017‒02‒19
seven papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Does Infrastructure Really Explain Economic Growth in Sub-Saharan Africa? By Odongo Kodongo; Kalu Ojah
  2. When No Bad Deed Goes Punished: Relational Contracting in Ghana versus the UK By Elwyn Davies; Marcel Fafchamps
  3. Natural Resources, Oil and Economic Growth in Sub-Saharan Africa By Janda, Karel; Quarshie, Gregory
  4. Agriculture and Food Global Value Chains in Sub-Saharan Africa: Does bilateral trade policy impact on backward and forward participation? By Jean Balié; Davide Del Prete; Emiliano Magrini; Pierluigi Montalbano; Silvia Nenci
  5. The economic ramification of equating women empowerment to feminism in Africa By Senzu, Emmanuel Tweneboah
  6. Financial sector development, economic volatility and shocks in sub-Saharan Africa By Muazu Ibrahim; Paul Alagidede
  7. The impact of home and host country institutions in the internationalization of an African multinational enterprise By John M. Luiz; Dustin Stringfellow; Anthea Jefthas

  1. By: Odongo Kodongo; Kalu Ojah
    Abstract: In the light of Africa’s palpable deficit in public infrastructure, we use System GMM to estimate a model of economic growth augmented by an infrastructure variable, for a panel of 45 Sub-Saharan African countries, over the period 2000-2011. We find that it is the spending on infrastructure and increments in the access to infrastructure that influence economic growth and development in Sub-Saharan Africa. Interestingly, these significant associations, especially those of infrastructure spending, are more important for lesser developed economies of the region than for the relatively more developed economies, which uncommonly have better than near-zero access to infrastructure. In addition to these robust direct links between the target variables, we find importantly that infrastructure access, and quality, also relate to economic growth indirectly via export diversification (trade competitiveness), and cross-border capital flows and export diversification, respectively. Among other important policy derivatives of our findings, we emphasize that efforts aimed at reversing Africa’s pervasive infrastructure deficit, in ways that enable economic growth and development, must be carefully nuanced.
    Keywords: Infrastructure access, infrastructure stock and quality, economic growth, Sub-Saharan Africa, System GMM
    JEL: H54 O11 O40 O55
    Date: 2016–12
  2. By: Elwyn Davies; Marcel Fafchamps
    Abstract: In relational contracting the threat of punishment in future periods provides an incentive not to cheat. But to what extent do people actually carry out this punishment? We compare relational contracting patterns in Ghana and the United Kingdom by conducting a repeated principal agent lab experiment, framed in a labour market setting. Each period, employers make offers to workers, who can choose to accept or reject this offer and, after accepting and being paid, what effort to exert. The employers and workers interact repeatedly over several periods. In the UK, subjects behave in line with theoretical predictions and previous experiments: high effort is rewarded and low effort punished. However, we do not find evidence for the use of such incentives in Ghana. As a result, employers fail to discipline a subgroup of “selfish” workers, resulting in a low average effort and low employers’ earnings. Set identification of Fehr-Schmidt preferences of the Ghanaian and British workers also shows that the share of “selfish” workers in our experiment in Ghana is not substantially different from the UK. Introducing competition for workers or a reputation mechanism do not significantly improve workers’ effort.
    JEL: D2 J41 O12
    Date: 2017–02
  3. By: Janda, Karel; Quarshie, Gregory
    Abstract: This paper takes a critical look at the natural resource curse in countries in sub-Saharan Africa and it highlights the role of institutionalised authority. The paper first provides a comprehensive literature review of natural resource curse, Dutch disease and the role of oil resources in resource curse. This is follow by the description of the relevant economic factors in sub-Saharan Africa, which is taken as prime example of the region with both important oil and other natural resources and with serious economic growth problems.
    Keywords: Economic Growth; Natural Resources; Oil; Institutions; Sub-Saharan Africa
    JEL: O43 P52 Q43
    Date: 2017–02–10
  4. By: Jean Balié (Food and Agricultural Organization of the United Nations, Rome (IT).); Davide Del Prete (IMT Lucca, Laboratory for the Analysis of Complex Economic Systems (IT) and Food and Agricultural Organization of the United Nations, Rome (IT).); Emiliano Magrini (Food and Agriculture Organization of the United Nations, Rome (IT).); Pierluigi Montalbano (Department of Economics and Social Sciences, Sapienza University of Rome (IT).); Silvia Nenci (Department of Economics, University of Roma Tre (IT))
    Abstract: The most recent literature on international trade highlights the key role of global value chains (GVCs) in structural transformation, development and growth. The common perception is that Africa, unlike most Latin American and Asian countries, has neither been able to intercept the main changes in trade patterns nor enter massively into global production networks. This work provides some insight into this topic. Using the EORA Input-Output Tables, we analyze whether bilateral import tariffs and shifts in trade regimes associated with regional trade agreements affect the backward participation (i.e., the use of foreign inputs for exports) and forward participation (i.e., the use of domestic intermediates in third country exports) of the SSA countries’ agriculture and food GVCs. Our results show that, despite their low world trade shares, GVC participation in SSA economies is increasing over time, mainly upstream as suppliers of unprocessed inputs. Furthermore, we show that the value added demand for SSA agricultural products primarily originates from the EU and emerging countries rather than from regional partners. Finally, by making use of a “gravity-like” identification strategy, we also find evidence that bilateral trade protection significantly affects GVC backward and forward participation in agriculture and food. These results call for a refinement of trade policy priorities in SSA.
    Keywords: global value chains, agro-food activities, multi-region input-output tables, bilateral trade policies, gravity model, Sub-Saharan Africa.
    JEL: F15 L23 O11 O55 Q17
    Date: 2017–04
  5. By: Senzu, Emmanuel Tweneboah
    Abstract: There is quantum empirical evidence and numerous literature that correlate women empowerment to macroeconomic growth, which further make a strong correlation of empowerment of women to feminism agenda. This has led to the rise of gender democracy and feminism in the past two decades up to date. However this development of women with high educational status driven under feminism is failing to correlate to any meaningful macroeconomic growth in Africa as proposed, which this paper phenomenological seeks to prove the lack of correlation between feminism and women empowerment, hence leading to low or no effect in macroeconomic growth in Africa economic ecosystem
    Keywords: women empowerment, feminism, macroeconomic development, Africa economic ecosystem
    JEL: E22 E26 O1 O11 P0
    Date: 2017–02
  6. By: Muazu Ibrahim; Paul Alagidede
    Abstract: The role of financial sector development in economic volatility has been extensively studied albeit without informative results largely on the failure of extant studies to decompose volatility into its various components. By disaggregating volatility, this study examines the effect of financial development on volatility as well as channels through which finance affects volatility components in 23 sub-Saharan African countries over the period 1980–2014 using the newly developed panel cointegration estimation strategy. Our findings reveal that while financial development affects business cycle volatility in a non-linear fashion, its effect on long run fluctuation is imaginary. More specifically, well developed financial sector dampens volatility at the business cycle. However, in the long run, unbridled financial development may magnify fluctuations. Further findings show that while monetary shocks have large magnifying effect on volatility, their effect in the short run is minuscule. The reverse however holds for real shocks. Our main conclusion is that irrespective of the component, volatility caused by monetary shocks is more important and persistent than those caused by real shocks and financial underdevelopment and factors driving fluctuations are largely internal. With regard to channels of manifestation, our evidence shows that whether in the short or long term, financial development dampens (magnifies) the effect of real shocks (monetary shocks) on the components of volatility with the dampening effects consistently larger only in the short run. Strengthening financial sector supervision, including cross-border oversight as well as adoption of inflation targeting may be very crucial in examining the right levels of finance and price stability necessary to falter economic fluctuations.
    Keywords: volatility, financial development, shocks, Business Cycle
    JEL: G0 O55
    Date: 2016–11
  7. By: John M. Luiz; Dustin Stringfellow; Anthea Jefthas
    Abstract: We demonstrate that firms can exploit their knowledge of ‘weak’ institutional settings and turn it into a source of advantage as they internationalize into locations with similar institutional ‘weaknesses.’ Using the case of one Africa’s most successful multinational enterprises we illustrate the value gained from initially capitalizing upon institutional complementarity (utilizing the comparative advantage linked to institutional know-how) by exploiting the experience of the home country’s environment into similar settings. Over time and through learning-by-doing, pressure arose to diversify the risk linked with over-exposure to institutional uncertainty and country risk, and this was associated with the process of institutional substitution into more advanced countries. We see an emerging multinational learning and building its capabilities by leveraging off its understanding of its home country institutional environment.
    Keywords: Emerging multinational enterprises, institutional voids, African multinational, firm and country specific advantages, institutional leverage capability
    JEL: F23 M16 L66
    Date: 2017–01

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