nep-afr New Economics Papers
on Africa
Issue of 2019‒05‒13
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Learning from the ?best?: The impact of tax-benefit systems in Africa By Jara Xavier; Bargain Olivier; Kwenda Prudence; Ntuli Miracle
  2. Institutional bypass and aid effectiveness in Africa By Chasukwa Michael; Banik Dan
  3. Impact of natural resource wealth on non-resource tax revenue mobilization in Africa: Do institutions and economic diversification matter? By Seydou Coulibaly
  4. Local content law and practice: The case of the oil and gas industry in Ghana By Ackah Charles; Mohammed Asaah
  5. Domestic and cross border spillover effects of corporate tax policy in Africa By Jean-François Brun; Seydou Coulibaly
  6. Regional Migration and Wage Inequality in the West African Economic and Monetary Union By Esther Mirjam Girsberger; Romuald Meango; Hillel Rapoport

  1. By: Jara Xavier; Bargain Olivier; Kwenda Prudence; Ntuli Miracle
    Abstract: Redistributive systems in Africa are still in their infancy but are constantly expanding in order to finance increasing public spending. This paper aims at characterizing the redistributive potential of six African countries: Ghana, Zambia, Mozambique, Tanzania, Ethiopia, and South Africa.These countries show contrasted situations in terms of income distribution. We assess the role of tax-benefit systems to explain these differences. Using newly developed tax-benefit microsimulations for all six countries, we produce counterfactual simulations whereby the system of the most (least) redistributive country is applied to the population of all other countries.In this way, we can decompose the total country difference in income distribution between the contribution of tax-benefit policies versus the contribution of other factors (market income distributions, demographics, etc.).This analysis contributes to the recent literature on the redistributive role of socio-fiscal policies in developing countries and highlights the role of microsimulation techniques to characterize how different African countries can learn from each other to improve social protection and reduce inequality.
    Keywords: microsimulation,Tax-benefit microsimulation,tax-benefit policy,Inequality,Poverty
    Date: 2019
  2. By: Chasukwa Michael; Banik Dan
    Abstract: Many practical and action-oriented international roadmaps to improve the quality of aid and its delivery and impact on development—including the Paris Declaration, Accra Agenda for Action, and Busan Partnership—emphasize a more active involvement of domestic institutions and procedures.Despite widespread agreement among both donor and recipient countries on this issue, we find that a large amount of disbursed aid tends to bypass national institutional structures. This practice is often justified on grounds of high levels of political and administrative corruption and weak implementation capacity in recipient country bureaucracies.We examine how and to what extent multi- and bi-lateral development agencies bypass national and local government institutions while channeling aid and the impact of such practices on aid effectiveness in Africa. Based on an empirical study of project aid and budget support provided to Malawi by the World Bank, the African Development Bank, and the German Economic Group, we argue that earmarked funding, specialized procurement arrangements, and the proliferation of Project Management Units are among the mechanisms used to circumvent the involvement of national institutions.We conclude that while such practices may achieve short-term gains by displaying successful and visible ‘donorship,’ the long-term impact is more uncertain. The bypassing of local institutions results in the fragmentation of aid, a lack of coordination among aid industry actors, and a general weakening of policy space and domestic capacity to formulate and implement development policy.
    Keywords: Aid effectiveness,Aid policy,development policy,Institutions,Corruption
    Date: 2019
  3. By: Seydou Coulibaly (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique, BAD - Banque africaine de développement / African Development Bank)
    Abstract: This paper estimates the impact of natural resources rents on non-resource tax revenue mobilization. Regressions are carried out using the Panel Smooth Transition Regression model for 29 African countries over the period 1995-2012. The empirical results indicate that while natural resource rents alone have direct negative impact on non-resource tax revenue, the quality of institutions and the level of economic diversification modulate this impact. Natural resource rents enhance non-resource tax revenue collection in more diversified economies and in economies with favorable institutional environment. These findings urge African governments to allocate natural resources revenues towards diversifying the economy and strengthening the quality of institutions for enhancing non-resource tax revenue mobilization.
    Keywords: Natural resource rents,Non-resource tax revenue,Institutions,Economic diversification,Africa
    Date: 2019–04–09
  4. By: Ackah Charles; Mohammed Asaah
    Abstract: Local content and local participation policy and legislation have come to stay in Ghana’s oil and gas industry. The policy and legislation have been described largely as adequate, promising, and necessary to promote local content and local participation in the oil and gas industry.Implementation of the policy and legislation has, however, produced mixed results, according to industry stakeholders and researchers. Evidence on the ground suggests some level of compliance by international oil companies to implement the policy and legislation on local content. Some Ghanaian companies have been awarded contracts to provide essential services and goods to these companies during exploration and production.Several factors, however, militate against effective implementation of the policy and legislation. Notable among these are the low capacity of local firms, discrimination against local firms by international oil companies through vertical integration, and the weak regulatory capacity of the Petroleum Commission to enforce local content implementation.Vigorous capacity building of local firms, affirmative actions for local firms and employees, and legislative reviews are recommended to enhance the implementation of local content and local participation in Ghana’s oil and gas industry.
    Keywords: Oil and gas,Law,Local content
    Date: 2018
  5. By: Jean-François Brun (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Seydou Coulibaly (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique, BAD - Banque africaine de développement / African Development Bank)
    Abstract: This paper examines spillover effects in corporate tax policy for African economies. Using a balanced panel data in statutory corporate income tax (CIT) rate for 34 African countries over the period 1995-2013, we find positive interaction between CIT rates in Africa only when common time trend effects are not controlled. We conclude that the evidence of pure corporate tax competition among African countries is weak. These countries' tendency to implement similar fiscal policies under the common intellectual assistance may explain the positive slope reaction between their CIT rates. Regarding corporate tax base spillovers, estimation results indicate that cuts in foreign countries' average corporate tax rate reduce the host country's corporate tax base. When the host country reacts to a one percentage point cut in foreign countries' CIT rates by cutting its own CIT rate in the same proportion, this ultimately results in a net erosion of its corporate tax base by 0.4%. This represents a 2.3 % loss of corporate tax revenue. Moreover, we find strategic complement responses in corporate tax base policies suggesting that countries react to the uptake of measures that tend to reduce the corporate tax burden in other countries by also undertaking similar measures.
    Keywords: Tax competition,Corporate income tax,Instrumental variable estimation,System GMM,Africa
    Date: 2019–04–09
  6. By: Esther Mirjam Girsberger (Economics Discipline Group, University of Technology Sydney); Romuald Meango (Max-Planck Institute for Social Law and Social Policy, Munich); Hillel Rapoport (Paris School of Economics, Universit´e Paris 1 Panth´eon-Sorbonne; CEPII; IZA)
    Abstract: This paper investigates the impact of regional migration on average wages and wage inequality in the West African Economic and Monetary Union (UEMOA). We exploit a unique data from a unified labour force household survey which covers natives and migrants in the seven economic capitals of the region. We estimate the counterfactual wage distributions of UEMOA migrants in absence of migration to evaluate the effect of regional migration. We find that regional migration increases the average wage by 1.8% and it entails a decrease in inequality in the UEMOA region between -1.5% (for the Gini coefficient) and -4.5% (for the interquartile ratio). The decrease in inequality in the UEMOA region is driven by a reduction in inequality between countries, while the migration effect on within-inequality differs across countries and remains overall small. When accounting for possible general equilibrium effects of migration on stayers’ wages, we find a similar or even stronger decrease in inequality, yet a smaller increase in the average wage. With general equilibrium effects, (negatively-) intermediately selected UEMOA migrants depress the average wage of natives in their host country and lead to a slight increase of the average wage among natives in the sending country, with the former effect dominating. Moreover, regional migration in the UEMOA mostly flows from countries with low wages to countries with higher wages. In combination with the general equilibrium effects described above this leads to a larger decrease in between-country inequality than in a setting with exogenous wages.
    Keywords: Migration; inequality; Gini index; West Africa
    JEL: F22 J61
    Date: 2019–02–21

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