nep-afr New Economics Papers
on Africa
Issue of 2019‒05‒06
four papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Are politically connected firms turtles or gazelles? Evidence from the Egyptian uprising By Hany Abdel-Latif; Hassan Aly
  2. Inclusive development in environmental sustainability in sub-Saharan Africa: insights from governance mechanisms By Asongu, Simplice; Odhiambo, Nicholas
  3. Monetary Policy and Financial Exclusion in an Estimated DSGE Model of Sub-Saharan African Economies By Paul Owusu Takyi; Roberto Leon-Gonzalez
  4. Africa and the New Rentier Effect: Oil, Aid, Regime-Type By Hisham Aidi

  1. By: Hany Abdel-Latif (Swansea University); Hassan Aly
    Abstract: Using an original firm-level database and utilizing the incidence of the Egyptian uprising of 2011, this paper provides an empirical investigation of the effects of firms political connections on employment growth in Egypt. Our unique dataset covers 4008 firms between 2004-2016, of which we were able to identify 735 politically connected firms. We set-up a quasi-natural experiment environment to explore how job creation responds to negative shocks to political connections. We use the differences in differences (DiD) framework to compare employment growth in both politically connected firms (PCFs) and their unconnected counterparts before and after the Egyptian uprising. To minimize possible bias in the DiD estimation due to dealing with a heterogeneous group of firms, we apply the propensity score matching (PSM). In addition, we estimate the quantile DiD at different points in the distribution. We find that connected firms before the shock decreased their job creation after the uprising. This implies that employment growth in PCFs has declined after receiving a negative political shock.
    Date: 2019
  2. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: This research examines the relevance of inclusive development in modulating the role of governance on environmental degradation. The study focuses on forty-four countries in sub-Saharan Africa for the period 2000-2012. The Generalised Method of Moments is employed as the empirical strategy and CO2 emissions per capita is used to measure environmental pollution. Bundled and unbundled governance dynamics are employed, notably: political governance (consisting of political stability/no violence and “voice and accountability”), economic governance (encompassing government effectiveness and regulation quality), institutional governance (entailing corruption-control and the rule of law), and general governance (a composite measure of political governance, economic governance and institutional governance). The following main findings are established. First, the underlying net effect in the moderating role of inclusive development in the governance-CO2 emissions nexus is not significant in regressions pertaining to political governance and economic governance. Second, there are positive net effects from the relevance of inclusive development in modulating the effects of regulation quality, economic governance and general governance on CO2 emissions. The significant and insignificant effects are elucidated. Policy implications are discussed.
    Keywords: CO2 emissions; Governance; Sustainable development; Sub-Saharan Africa
    JEL: C52 O38 O40 O55 P37
    Date: 2019–01
  3. By: Paul Owusu Takyi (National Graduate Institute for Policy Studies, Tokyo, Japan); Roberto Leon-Gonzalez (National Graduate Institute for Policy Studies, Tokyo, Japan)
    Abstract: This paper examines the effectiveness of monetary policy and its implications for financially included and excluded households in Sub-Saharan African (SSA) economies, using an estimated New-Keynesian DSGE model. The model has financially included ( eoptimizing f) households coexisting with financially excluded ( ehand-to-mouth f) households. We exploit time series data on four SSA economies, spanning 1985-2016, to estimate the model fs parameters through Bayesian inference methods. Our estimation results show that the share of financially excluded households in these economies is relatively small, usually between 35% and 42%. This finding suggests that previous efforts to enhance financial inclusion in SSA have contributed to a general lowering of the cost of financial market participation. Our results also indicate that the monetary authorities in SSA countries have targeted inflation more aggressively than output growth. Further, the results of our Bayesian impulse response analysis suggests that a positive monetary policy shock does perform its intended role of significantly reducing inflation and output, despite a sizeable fraction of the population is financially excluded. Additionally, we find that a contractionary monetary policy tends to have differentiated impacts; it decreases consumption of financially excluded households more than that of financially included ones. The results reveal that financially included households are able to absorb shocks, and thus can smooth consumption more effectively than financially excluded households. Consequently, given that financially included households are better positioned to address shocks, it is recommended that monetary authorities in developing countries place greater emphasis on output growth relative to inflation. That shifting emphasis could support the stabilization of income, which would enable financially excluded households to smooth consumption. In addition, efforts to ensure full financial inclusion are recommended so that monetary policy can more fully achieve its objectives.
    Date: 2019–04
  4. By: Hisham Aidi
    Abstract: Scholars of European state formation have long underlined the connection between taxation and political development, noting that revenue collection can promote institution-building and accountability. This argument goes back at least to Joseph Schumpeter (1918) who spoke of the “tax state,” describing how a country’s tax system shapes the relationship between a state and its citizenry. But scholars of the post-colonial world observe that the process of state formation in Europe occurred in a specific context; whereas state-building in the contemporary era occurs in a context where there is an abundance of natural resources and strategic rents at the international level, which rulers can access. Different theoretical tools are therefore required to understand political development in the non-West. The diffusion of rents at the international level and its effect on state structures would give rise to “rentier state theory,” introduced by economist Hussein Madhavy in 1970, to understand the political economy of Iran specifically, but more generally of states that derive a substantial part of their national revenue from the “rent” of local resources to external actors. Giacomo Luciani and Hazem Al Beblawi would elaborate on this thesis adding that rentier states also lack a strong domestic productive sector, and that only a small segment of their labor force is employed in the generation of the rent.
    Date: 2019–02

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