nep-afr New Economics Papers
on Africa
Issue of 2019‒11‒25
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Macroeconomic and bank-specific determinants of non-performing loans in sub-Saharan Africa By Trust R. Mpofu; Eftychia Nikolaidou
  2. The tax elasticity of formal work in African countries By Pirttilä Jukka; McKay Andy; Schimanski Caroline
  3. China and the World Bank - How Contrasting Development Approaches affect the Stability of African States By Kai Gehring; Lennart Kaplan; Melvin H.L. Wong
  4. The Effect of Antimalarial Campaigns on Child Mortality and Fertility in Sub-Saharan Africa By Joshua Wilde; Bénédicte H. Apouey; Joseph Coleman; Gabriel Picone
  5. Hydropower dependency and climate change in sub-Saharan Africa: A nexus framework and evidence-based review By Falchetta, Giacomo; Gernaat, David E.H.J.; Hunt, Julian; Sterl, Sebastian
  6. Physical Capital, Skill Intensity and Ownership Structure in Foreign Direct Investment Projects in Sub-Saharan Africa By J. Paul Dunne; Santigie Mohamed Kargbo

  1. By: Trust R. Mpofu (School of Economics, University of Cape Town); Eftychia Nikolaidou (School of Economics, University of Cape Town)
    Abstract: This paper investigates the macroeconomic and bank-specific determinants of non-performing loans (NPLs) in eight sub-Saharan African economies. The study is motivated by the fact that some of these economies have experienced banking crises in the past, their NPLs have relatively been rising post the 2008/2009 global financial crisis and have recently experienced rapid growth of bank credit to the private sector. Such issues pose credit risks in the banking sector. Employing dynamic panel data methods over the period 2000-2017 and using a variety of specifications, the results show that NPLs decrease when real GDP growth rate, return on equity, return on assets, and bank size increase and rises when public debt, inflation rate, broad money, and domestic credit to private sector by banks increase.
    Date: 2019
  2. By: Pirttilä Jukka; McKay Andy; Schimanski Caroline
    Abstract: A key policy problem in most developing countries is the size of the informal sectorÂÂ and its persistence over time. In need to increase their tax revenues, policy makers face a trade-offÂÂ between decreasing tax rates (making formalizing potentially more attractive) and alternativelyÂÂ raising tax rates (potentially slowing down the formalization of the economy if people preferÂÂ informal employment or self-employment). Evidence on formal versus informal wages and jobÂÂ characteristics in different sectors and the impact of tax changes on the extent of informality inÂÂ developing countries is, however, very limited.This paper estimates the tax responsiveness of theÂÂ extensive margin of formality, that is the propensity to be a formal rather than informal worker,ÂÂ for four sub-Saharan African countries. Using repeated cross-sections of household data andÂÂ applying grouping estimator techniques, this paper does not find robust effects of taxes on theÂÂ extent of formal work, although in a pooled sample taxes appear to lower the share of formalÂÂ workers in some specifications.
    Keywords: Labour supply,Sub-Saharan Africa,Taxation,Developing countries,Informality
    Date: 2019
  3. By: Kai Gehring (University of Zurich, CESifo); Lennart Kaplan (German Development Institute); Melvin H.L. Wong (Leibniz University Hannover)
    Abstract: China’s development model challenges the approaches of traditional Western donors like the World Bank. We argue that both aim at stability, but differ in the norms propagated to achieve that. Using fixed effects and IV estimations, we analyze a broad range of subnational stability measures in Africa. Aid by both the WB and China does not increase outright conflict nor any type of citizen protest, on average. Both even reduce outright conflict by governments against civilians. Still, Chinese aid is associated with more government repression and an increased acceptance of authoritarian norms, while the World Bank projects strengthen democratic values.
    Keywords: Development Models, Development Aid, Stability, Conflict, Repression, World Bank, China, Africa, Geolocation
    JEL: D74 F52 H81 O19 P51
    Date: 2019–10
  4. By: Joshua Wilde (MPIDR - Max Planck Institute for Demographic Research - Max-Planck-Gesellschaft); Bénédicte H. Apouey (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Joseph Coleman (USF - University of South Florida); Gabriel Picone (USF - University of South Florida)
    Abstract: We examine the extent to which recent declines in child mortality and fertility in Sub-Saharan Africa can be attributed to insecticide-treated bed nets (ITNs). Exploiting the rapid increase in ITNs since the mid-2000s, we employ a difference-in-differences estimation strategy to identify the causal effect of ITNs on mortality and fertility. We show that the ITN distribution campaigns reduced all-cause child mortality, but surprisingly increased total fertility rates in the short run in spite of reduced desire for children and increased contraceptive use. We explain this paradox in two ways. First, we show evidence for an unexpected increase in fecundity and sexual activity due to the better health environment after the ITN distribution. Second, we show evidence that the effect on fertility is positive only temporarily – lasting only 1-3 years after the beginning of the ITN distribution programs – and then becomes negative. Taken together, these results suggest the ITN distribution campaigns may have caused fertility to increase unexpectedly and temporarily, or that these increases may just be a tempo effect – changes in fertility timing which do not lead to increased completed fertility.
    Keywords: Malaria,Bed nets,Child mortality,Fertility,Sub-Saharan Africa
    Date: 2019–09
  5. By: Falchetta, Giacomo; Gernaat, David E.H.J.; Hunt, Julian; Sterl, Sebastian
    Abstract: In sub-Saharan Africa, 160 million grid-connected electricity consumers live in countries where hydropower accounts for over 50% of total power supply. A warmer climate with more frequent and intense extremes could result in supply reliability issues. Here, (i) a robust framework to highlight the interdependencies between hydropower, water availability, and climate change is proposed, (ii) the state-of-the art literature on the projected impacts of climate change on hydropower in sub-Saharan Africa is reviewed, and (iii) supporting evidence on past trends and current pathways of power mix diversification, drought incidence, and climate change projections is provided. We find that only few countries have pursued a diversification strategy away from hydropower over the last three decades, while others' expansion plans will reinforce the dependency. This will occur irrespective of the fact that some of the largest river basins have experienced a significant drying during the last century. Agreement is found on likely positive impacts of climate change on East Africa's hydropower potential, negative impacts in West and Southern Africa, and substantial uncertainty in Central Africa. Irrespective of the absolute change in gross technical potential, more frequent and intense extremes are projected. One possible paradigm to increase resilience and fulfil the pledges of the Paris Agreement is a synergetic planning and management of hydropower and variable renewables.
    Date: 2019–06–05
  6. By: J. Paul Dunne (School of Economics, University of Cape Town); Santigie Mohamed Kargbo (West African Monetary Institute (WAMI), Ghana)
    Abstract: While the intra-firm trade literature finds that capital-intensive foreign direct investment (FDI) is more likely to occur through joint ventures with local companies when targeted at capital-intensive industries, there is scant evidence on what happens in developing countries. This paper investigates FDI in sub-Saharan Africa, using a large firm-level dataset of manufacturing and services sectors for 19 countries in the region in 2010. It finds strong evidence that domestic firms are indeed more likely to be integrated in FDI projects in capital-intensive rather than labour-intensive sectors. This means that the composition of FDI matters for developing countries, as more capital-intensive FDI is more likely to result in joint ventures and this should facilitate knowledge and technology spillovers to the local agents. In addition, it implies that support is needed to develop skills in local firms in capital-intensive sectors to encourage foreign firms to engage in joint ventures with them, rather than set up wholly owned subsidiaries and outsource.
    Date: 2019

This nep-afr issue is ©2019 by Sam Sarpong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.