nep-afr New Economics Papers
on Africa
Issue of 2020‒06‒08
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. International Prices and Continuing Conflict Theory and Evidence from Sub-Saharan Africa (1980-2017) By Raul Caruso; Jon Echevarria
  2. Deficiencies of international investment law: What chances for "critical lawyers" to civilize global value chains and/or to transform the status quo of the economic world order? By Diaby-Pentzlin, Friederike
  3. The Old-Age Security Motive for Fertility: Evidence from the Extension of Social Pensions in Namibia By Rossi, Pauline; Godard, Mathilde
  4. On the Computation and Essence of the Nominal Convergence Criteria for Africa Currency Union: ECOWAS in Perspective By Abban, Stanley
  5. Coronavirus-Lockdowns, Secondary Effects and Sustainable Exit-Strategies for Sub-Saharan Africa By Raymond Boadi Frempong; David Stadelmann; Frederik Wild
  6. Does Foreign Direct Investment Contribute to Poverty Reduction in Cameroon? An ARDL-Bounds Testing Approach By Stéphane Mbiankeu Nguea; Issidor Noumba; Armand Gilbert Noula

  1. By: Raul Caruso (Department of Economic Policy and CSEA, Catholic University of Sacred Heart; CESPIC, Catholic University 'Our Lady of Good Counsel'); Jon Echevarria (Departamento de Fundamentos del Análisis Económico II, Universidad del País Vasco / Euskal Herriko Unibertsitatea)
    Abstract: This paper presents first a theoretical model of conflict between two parties in a two-sector economy. In a ‘contested’ sector, they struggle to appropriate the maximum possible fraction of a contestable output. In an ‘uncontested’ sector, they hold secure property rights over the production of some goods. Parties split their resource endowment between ‘butter’, ‘guns’ (in the contested sector) and ‘ice cream’ (in the uncontested sector). The model predicts that the level of guns depends positively on the relative price of goods produced in contested and those produced in the uncontested sector. As the relative price decreases actors decrease their outlays in ‘guns’. The empirical section is focused on a panel of Sub-Saharan African countries for the period 1980-2017. Results show that international prices of manufactures (interpreted as the uncontested ice-cream sector) are negatively associated with arms imports and military expenditure so confirming the theoretical prediction. The results appear to be robust. In addition, we have checked whether world prices have an impact on the probability of an armed conflict. We found that internal and internationalised civil conflicts react differently to world prices.
    Keywords: Theoretical model of conflict, resource curse, butter guns and ice cream, structure of the economy, commodity prices, MUV, military expenditures, arms imports, civil war
    JEL: D74 O13 H56
    Date: 2020–02–01
  2. By: Diaby-Pentzlin, Friederike
    Abstract: Rules should be fair, no matter from which perspective (Rawls, 1999). Given that Justitia holds a balance, current international investment law is disturbingly onesided. It mainly sets out to protect property positions of foreign investors. According to mainstream legal thinking, imposing obligations on transnational corporations (TNC) is only possible by means of the gentle non-binding rules of corporate social responsibility (CSR). As will be documented here, international investment law today has become a body of law for enterprises with hardly any regard for people and planet putting the private gains of few above the common good of many. Conventional approaches to legal questions deal with legal dogmata by detaching the law from its economic and political context. However, since legal norms are the result of societal negotiations, critical jurists have a role in analysing the law and its implementation, given the prevailing social and economic backgrounds. They see more easily that private interests increasingly drive legal doctrines and that social or environmental needs are largely neglected in mainstream legal activities. In international relations, the political consensus of the states in the United Nations (UN) has now moved beyond the Millennium Development Goals and their ideology of rich countries helping the poor (for a critique see Amin, 2006) within the dominant asymmetrical, fossil-based production and consumption paradigms. Due to acknowledgment of the increasingly pressing environmental and social needs, since 2016 more comprehensive and universal UN Sustainable Development Goals now aim to "transform our world" (United Nations, 2019). In international investment law, such changes are still to come. African states and societies in particular are undergoing economic and social transformations towards a nowadays also questionable modernity, and within decades, a process that took centuries in Europe. There are no more rural areas spared from agricultural or mining investments. So particularly in Africa, critical jurists and scientists need to analyse and point out which legal rules and interpretations on the international, regional, national and local level really serve the interests of the population in Africa. (...)
    JEL: F53 F54 O18
    Date: 2020
  3. By: Rossi, Pauline; Godard, Mathilde
    Abstract: The old-age security motive for fertility postulates that people’s needs for old-age support raise the demand for children. We test this widespread idea using the extension of social pensions in Namibia during the nineties. The reform eliminated inequalities in pension coverage and benefit across regions and ethnic groups. Combining differences in pre-reform pensions and differences in exposure across cohorts, we show that pensions substantially reduce fertility, especially in late reproductive life. This article provides the first quasi-experimental quantification of the old-age security motive. The results suggest that improving social protection for the elderly could go a long way in fostering fertility decline in Sub-Saharan Africa.
    Keywords: Fertility, Old-age pensions, Social security, Africa, Difference-in-differences
    Date: 2020–02
  4. By: Abban, Stanley
    Abstract: The ECOWAS in a quest to form a currency union prompted the set out nominal convergence criteria for member states. The study seeks to delineate the importance of the nominal convergence criteria to ensure price and exchange rate stability. In this context, the revised ECOWAS convergence criteria were elaborated to unveil the degree of convergence. Also, the study computed for the realistic nominal convergence targets supposing the union is formed and suggested ex-ante steps to fast track convergence. Additionally, the study showed the exigency for trade and institutional convergence through policy coordination. The study concludes that countries should commit to attaining the convergence criteria in the shortest possible time to aid in the realization of the policy. The study recommends that relatively exposing the large informal sector, ensuring political ramification, and encouraging savings is key to achieving the nominal convergence criteria.
    Keywords: nominal convergence criteria, currency union, large informal sector, Optimal Currency Area, inflation, public deficits, public debts, reserves.
    JEL: E5 E52 E61 E63 H2
    Date: 2020–05–06
  5. By: Raymond Boadi Frempong; David Stadelmann; Frederik Wild
    Abstract: Pandemics and the reactions to pandemics increase the general problem of scarcity. Scarcity induced trade-offs are particularly relevant for countries in Sub-Saharan Africa as (1) the region suffers from numerous other diseases whose death toll may increase substantially due to lockdowns, (2) economic effects of lockdowns affect the region more negatively because citizens in Sub-Saharan Africa have limited economic resources compared to more developed economies, and (3) weak institutions may increase the adverse societal impacts of the pandemic.
    Keywords: Pandemics; General health; Economic effects; Institutions; Sustainability
    JEL: I10 O10
    Date: 2020–06
  6. By: Stéphane Mbiankeu Nguea (Faculty of Economics and Management, University of Dschang); Issidor Noumba (Faculty of Economics and Management, University of Yaoundé II - Soa); Armand Gilbert Noula (Faculty of Economics and Management, University of Dschang)
    Abstract: This paper investigates the impact of Foreign Direct Investment (FDI) on poverty reduction in Cameroon from on the period 1984-2014. Auto Regressive Distributed Lags (ARDL) bounds test approach to co-integration has been applied to analyze the data coming from freedom house and World Development Indicators (WDI). Three poverty reduction proxies namely life expectancy, per capita household consumption expenditure and infant mortality rate are used to capture multidimensional feature of poverty and to increase the robustness of the results. The findings revealed that the impact of FDI to alleviate poverty is less significant in Cameroon as evidenced by one out of three (infant mortality) poverty reduction proxies where a short-run positive impact of FDI on poverty reduction is confirmed. These findings suggest that Cameroon may use FDI as a short-term poverty reduction instrument. JEL Classifications: F21, I30
    Keywords: Foreign direct investment,poverty reduction,co-integration,autoregressive distributed lag,Cameroon
    Date: 2020–05–11

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