nep-afr New Economics Papers
on Africa
Issue of 2020‒11‒09
four papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Is tourism a spur to economic growth in South Africa: An empirical investigation By Odhiambo, Nicholas M; Nyasha, Sheilla
  2. Take the Highway? Paved Roads and Well-Being in Africa By Elodie Djemai; Andrew E. Clark; Conchita D'Ambrosio
  3. Five years of regional risk pooling: An updated cost-benefit analysis of the African risk capacity By Kramer, Berber; Rusconi, Rob; Glauber, Joseph W.
  4. Trade and FDI Thresholds of CO2 emissions for a Green Economy in Sub-Saharan Africa By Asongu, Simplice A; Odhiambo, Nicholas M

  1. By: Odhiambo, Nicholas M; Nyasha, Sheilla
    Abstract: In this study, the dynamic Granger-causality between tourism development and economic growth in South Africa was empirically examined during the period 1995-2016. The study was motivated by the growing important role of the tourism sector in economic growth and development. It was also motivated by the limelight that the South African tourism sector has been enjoying in recent years, on the one hand, and the lack of sufficient coverage of tourism-growth nexus studies in many sub-Saharan African countries, on the other hand. Unlike some previous studies that used one proxy, the current study used two tourism proxies, namely tourist arrivals and tourism revenue, to examine this link. In addition, the study used exchange rate and foreign direct investment as intermittent variables in a multivariate Granger-causality model in order to address the omission-of-variable bias. To enhance the robustness of the results, the study also used two measures of tourism revenue, namely total tourism revenue and total tourism revenue as a percentage of GDP. Using the auto-regressive distributed lag (ARDL)-bounds testing approach and the error correction model, the study found that the direction of causality between tourism development and economic growth in South Africa is sensitive to the proxy used and the time under consideration. When the tourist arrivals variable is used as a proxy for tourism development, bidirectional causality between tourism development and economic growth is found to prevail in the short run, while a unidirectional causality from economic growth to tourism development is found to dominate in the long run. However, when tourism revenue is used as a proxy, a feedback relationship is found to prevail, but only in the short run. The result is robust across the two different measures of tourism revenue. The study, therefore, recommends that short-term policy efforts should be directed at developing the tourism sector and the real sector as both sectors have been found to reinforce each other in the short run, irrespective of the tourism proxy used.
    Date: 2020–10
  2. By: Elodie Djemai (Universite Paris-Dauphine, PSL Research University, IRD, LEDa, DIAL); Andrew E. Clark (Paris School of Economics - CNRS); Conchita D'Ambrosio (Department of Cognitive and Behavioral Sciences, University of Luxembourg)
    Abstract: Public Goods aim to improve individual welfare. We investigate the causal consequences of roads on well-being for 24 African countries, instrumenting paved roads by 19th Century hypothetical lines between major ports and cities. We have data on over 32000 individuals, and consider both their objective and subjective well-being. Roads reduce material deprivation, in terms of access to basic needs. But at the same time those closer to roads evaluate their living conditions as being worse. This suggests that roads are a double-edged sword in Africa, either being associated with worse outcomes in non basic-needs domains, or increasing individuals' aspirations.
    Keywords: Roads, Subjective Well-being, Basic Needs, Material Deprivation, Africa
    JEL: D63 I32 O18
    Date: 2020–07
  3. By: Kramer, Berber; Rusconi, Rob; Glauber, Joseph W.
    Abstract: An initial cost-benefit analysis (CBA) of the African Risk Capacity (ARC), published in 2013, showed that regional risk pooling for severe droughts could increase benefits to poor households by as much as US$ 1.90 per dollar invested, due to the speed, cost and targeting gains from improved risk financing and contingency planning of a humanitarian response. We revisit the assumptions underpinning this initial CBA to reflect current ARC operations, and we update the CBA using new methods for evaluating the costs and benefits of regional risk pooling to finance disaster risk management. Under the revised methods and assumptions, the increase in benefits to the poor will have exceeded the costs of regional risk pooling, but not by as much as US$ 1.90 per dollar invested. This is because ARC premiums have been higher than assumed in the initial CBA, and insured countries have used ARC payouts mainly to distribute food aid, instead of leveraging state-contingent welfare schemes with potentially larger speed, cost and targeting gains. We discuss potential ways to lower premiums and strengthen the benefits to poor households, highlighting also the potential to realize welfare gains from improved risk management and investments ex ante, even during years without insurance payout.
    Keywords: AFRICA; AFRICA SOUTH OF SAHARA; CENTRAL AFRICA; EAST AFRICA; NORTH AFRICA; SOUTHERN AFRICA; WEST AFRICA; drought; disaster risk management; cost benefit analysis; risk transfer; mitigation; investment; disaster risk reduction; sovereign risk financing; risk financing; risk pooling
    Date: 2020
  4. By: Asongu, Simplice A; Odhiambo, Nicholas M
    Abstract: This research focuses on assessing how improving openness influences CO2 emissions in Sub-Saharan Africa. It is based on 49 countries in SSA for the period 2000-2018 divided into: (i) 44 countries in SSA for the period 2000-2012; and (ii) 49 countries for the period 2006-2018. Openness is measured in terms of trade and foreign direct investment (FDI) inflows. The empirical evidence is based on the Generalised Method of Moments. The following main findings are established. First, enhancing trade openness has a net positive impact on CO2 emissions, while increasing FDI has a net negative impact. Second, the relationship between CO2 emissions and trade is a Kuznets shape, while the nexus between CO2 emissions and FDI inflows is a U-shape. Third, a minimum trade openness (imports plus exports) threshold of 100 (% of GDP) and 200 (% of GDP) is beneficial in promoting a green economy for the first and second sample, respectively. Fourth, FDI is beneficial for the green economy below critical masses of 28.571 of Net FDI inflows (% of GDP) and 33.333 of net FDI inflows (% of GDP) for first and second samples, respectively. It follows from findings that while FDI can be effectively managed to reduce CO2 emissions, this may not be the case with trade openness because the corresponding thresholds for trade openness are closer to the maximum limit. This study complements the extant literature by providing critical masses of Trade and FDI that are relevant in promoting the green economy in Sub-Saharan Africa.
    Keywords: CO2 emissions; Economic development; Africa; Sustainable development
    Date: 2020–10

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