nep-afr New Economics Papers
on Africa
Issue of 2020‒10‒05
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Exchange rate policy and external vulnerabilities in Sub-Saharan Africa: nominal, real or mixed targeting? By Fadia Al Hajj; Gilles Dufrénot; Benjamin Keddad
  2. How Did Africa's Prospective Petroleum Producers Fall Victim to the Presource Curse ? By Mihalyi,David; Scurfield,Thomas
  3. Trade and Economic Growth: Theories and Evidence from the Southern African Development Community By Farahane, Matias Jaime; Heshmati, Almas
  4. Ethiopia's agrifood system: Past trends, present challenges, and future scenarios: Synopsis By Dorosh, Paul A., ed.; Minten, Bart, ed.
  5. Mining and the Quality of Public Services : The Role of Local Governance and Decentralization By Konte,Maty; Vincent,Rose Camille
  6. Adverse selection into competition: Evidence from a large-scale field experiment in Tanzania By Almås, Ingvild; Berge, Lars Ivar; Bjorvatn, Kjetil; Somville, Vincent; Tungodden, Bertil

  1. By: Fadia Al Hajj (College of Business Administration - GUST - Gulf University for Science and Technology); Gilles Dufrénot (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, AMU - Aix Marseille Université); Benjamin Keddad (PSE - Paris School of Economics)
    Abstract: This paper discusses the theoretical choice of exchange rate regimes in Sub-Saharan African countries that are facing external vulnerabilities. To reduce instability, policymakers choose among promoting external competitiveness using a real anchor, lowering the burden of foreign debt using a nominal anchor or using a policy mix of both anchors. We observe that these countries tend to adopt mixed anchor policies. We solve a state space model to explain the determinants of and the strategy behind this policy. We find that the mixed targeting policy is a two-step strategy: First, monetary authorities choose the degree of nominal exchange rate flexibility according to the velocity of money, trade openness, foreign debt, degree of exchange rate pass-through and exchange rate target zone. Second, authorities seek to stabilize the real exchange rate depending on the degree of competition in the domestic goods market and the degree of foreign exchange intervention. We conclude with regime-switching estimations to provide empirical evidence of how these economic fundamentals influence exchange rate policy in Sub-Saharan Africa.
    Keywords: regime-switching model,external vulnerabilities,exchange rate policy,Sub-Saharan Africa
    Date: 2020
  2. By: Mihalyi,David; Scurfield,Thomas
    Abstract: This paper reviews resource sector developments in 12 countries in Sub-Saharan Africa that made their first (major) petroleum discoveries during the most recent commodity boom. The analysis, which goes back to 2001, looks at sector forecasts of international organizations, governments, and companies and compares them with the results that emerged. The paper finds that a third of the countries did not make any commercially viable discoveries. Among those that potentially had commercial finds, the latest timelines from discovery to production are 73 percent longer on average than initially expected. In the six countries for which there are comparable data, revenue collected thus far or the most recent revenue projections for countries yet to reach production are 63 percent lower on average than the initial forecasts. All 12 countries experienced a disappointment in at least one of the three dimensions analyzed?and these disappointments are likely to be exacerbated by the recent price crash. The paper also documents the various policies adopted in response to the discoveries and -- with the benefit of hindsight -- finds that, in some cases, this over optimism contributed to the'presource curse~^!!^: suboptimal policymaking that did not align with the new realities. Some recommendations are provided on how better to navigate the inherent uncertainties in developing the sector.
    Keywords: Oil Refining&Gas Industry,Oil&Gas,Public Finance Decentralization and Poverty Reduction,Public Sector Economics,Energy Demand,Energy and Mining,Energy and Environment
    Date: 2020–09–08
  3. By: Farahane, Matias Jaime (Eduardo Mondlane University); Heshmati, Almas (Jönköping University, Sogang University)
    Abstract: This paper empirically tests the hypothesis that trade can act as an engine of growth using panel data for the Southern African Development Community (SADC), a regional integration agreement (RIA) organization, the central objective of whose formation was the need to accelerate, foster, and encourage the region's growth. Our results indicate that during the period covered by this study (2005-2017), export expansion stimulated growth, more openness to trade reduced it, and that the formation of SADC had not yet brought about any effects on growth perhaps because of lack of full establishment of the primary instruments for achieving its central objective. These results lead to three conclusions. Firstly, trade through export expansion seems to be a better solution for SADC for achieving the central objective of its formation. Secondly, more openness to trade seems to jeopardize growth. Finally, the formation of SADC has not yet brought about the expected gains from a RIA. In this context, we recommend that policymakers should consider adopting measures aimed at supporting increased trade through promoting export expansion, achieving strong absorption of negative chocks that usually result from trade, and exploring the possibility of establishing all the planned primary instruments for achieving SADC's central objective.
    Keywords: international trade, regional integration agreements, free trade area, customs union, Prebish-Singer Hypothesis
    JEL: F15 F36 F43 O43 O47
    Date: 2020–09
  4. By: Dorosh, Paul A., ed.; Minten, Bart, ed.
    Abstract: Ethiopia has experienced impressive agricultural growth and poverty reduction, stemming in part from substantial public investments in agriculture. Yet, the agriculture sector now faces increasing land and water constraints along with other challenges to growth. Ethiopia’s Agrifood System: Past Trends, Present Challenges, and Future Scenarios presents a forward-looking analysis of Ethiopia’s agrifood system in the context of a rapidly changing economy. Growth in the agriculture sector remains essential to continued poverty reduction in Ethiopia and will depend on sustained investment in the agrifood system, especially private sector investment. Many of the policies for a successful agricultural and rural development strategy for Ethiopia are relevant for other African countries, as well. Ethiopia’s Agrifood System should be a valuable resource for policymakers, development specialists, and others concerned with economic development in Africa south of the Sahara.
    Keywords: ETHIOPIA, EAST AFRICA, AFRICA SOUTH OF SAHARA, AFRICA, agrifood systems, agriculture, climate change, natural resources, crop production, yields, crops, livestock, food security, welfare, farm size, value chains, households, food consumption, cereals, food prices, labour markets, poverty, agricultural development, rural development
    Date: 2020
  5. By: Konte,Maty; Vincent,Rose Camille
    Abstract: This paper investigates the local effects of mining on the quality of public services and on people's optimism about their future living conditions. It also assesses the mediating role of local institutions and local governments'taxing rights in shaping the proximity-to-mine effects. The empirical framework connects more than 130,000 respondents from the Afrobarometer survey data (2005-2015) to their closest mines based on the geolocation coordinates of the enumeration areas (EA) and data on the mines and their respective status from the SNL Metals&Mining. The geo-referenced data are matched with new indicators on local governments'taxing rights across the African continent. The results suggest that citizens living near an active mine are less likely to approve government performance in key public goods and services -- including health, job creation and improving living standards of the poor. On the mediating role of local governance and local taxing rights, the findings point to a negative effect of local corruption, yet a positive effect of local authorities? discretion over tax and revenues. However, the positive marginal effect of local taxing powers tends to reduce in environments with poor quality of local governance, high incidence of bribe payment and low level of trust in local government officials. Residents of mining communities with low corruption and comparatively high-level of raising revenue ability have the highest rate of positive appraisal compared to the other scenarios.
    Keywords: Mining&Extractive Industry (Non-Energy),Energy and Natural Resources,Coastal and Marine Resources,Local Government,Social Accountability,Regional Governance
    Date: 2020–09–08
  6. By: Almås, Ingvild (Dept. of Economics, Norwegian School of Economics and Business Administration); Berge, Lars Ivar (Dept. of Accounting, Auditing and Law, Norwegian School of Economics and Business Administration); Bjorvatn, Kjetil (Dept. of Economics, Norwegian School of Economics and Business Administration); Somville, Vincent (Dept. of Economics, Norwegian School of Economics and Business Administration); Tungodden, Bertil (Dept. of Economics, Norwegian School of Economics and Business Administration)
    Abstract: An influential literature has shown that women are less willing to compete than men, and the gender gap in competition may contribute to explaining gender differences in educational choices and labor market outcomes. This study reports from a large-scale randomized controlled trial of a women empowerment program in Tanzania targeting young women at the end of secondary school. Combining the randomized controlled trial, a lab-in-the-field experiment and survey data, we provide evidence suggesting that the program caused adverse selection into competition: low performing women competed more, while there was no effect on the high performers. We provide a theoretical framework to illustrate an adverse selection mechanism that may contribute to explain why the program only affected the willingness to compete among low performers. Our results emphasize the importance of understanding sorting mechanisms and heterogeneous treatment effects in the design of policies and programs.
    Keywords: Competition; Fairness
    JEL: C19 I24 J16
    Date: 2020–09–18

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