nep-afr New Economics Papers
on Africa
Issue of 2021‒04‒19
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Regional redistribution of mineral resource wealth in Africa By Asatryan, Zareh; Baskaran, Thushyanthan; Birkholz, Carlo; Hufschmidt, Patrick
  2. Efficiency of Microfinance Institutions:analysis of Southern African Development Community (SADC) member countries By Elsa Assiaty de L. A. Agostinho; Raquel M. Gaspar
  3. Ethnicity nexus in federalism and the [mis]management of diversity in Africa By Olaiya, Taiwo
  4. Corruption and Access to Socio-economic Services in Africa By Andreas Freytag; Muhammad Faraz Riaz
  5. Risk Sharing and the Demand for Insurance: Theory and Experimental Evidence from Ethiopia By Erlend Berg; Michael Blake; Karlijn Morsink
  6. The long journey towards Pan-African integration: The African Continental Free Trade Area and its challenges By Tröster, Bernhard; Janechová, Eva

  1. By: Asatryan, Zareh; Baskaran, Thushyanthan; Birkholz, Carlo; Hufschmidt, Patrick
    Abstract: We study the economic implications of mineral resource activity for non-mining regions at the grid-level across the African continent. We find that capital cities benefit from mineral resource activity anywhere in the country. Leaders' birth regions also benefit, but only in autocratic regimes. Generic non-mining regions, on the other hand, are worse off. These results suggest that regional redistribution of resource rents in Africa is primarily undertaken to the benefit of capital cities and leaders' birth regions. In contrast, non-mining regions do not appear to be sufficiently compensated for the negative spillovers they may face due to mining activity elsewhere in the country.
    Keywords: Mineral resources,spillovers,spatiality,luminosity,favoritism,democracy,Africa
    JEL: H77 O13 R12
    Date: 2021
  2. By: Elsa Assiaty de L. A. Agostinho; Raquel M. Gaspar
    Abstract: Microfinance is seen as an important tool for financial inclusion and the fight against poverty because it has both a social and financial focus. The main objective of this paper is to evaluate the financial and social efficiency of 18 microfinance institutions (MFIs) in the year 2016 from 8 member countries of the Southern African Development Community (SADC). The methodology chosen is the data envelopment analysis (DEA) with variable returns to scale (VRS) using an input-oriented production approach. The results indicate higher scores of financial efficiency than social efficiency. This may suggest that microfinance institutions adopt a more institutionalist approach over the welfarist approach. We also find evidence that providing financial services to women or the entire disadvantaged population is profitable. However, non-bank financial institutions (NBFIs) and non-governmental organizations (NGOs) are more efficient in this regard than credit unions or banks.
    Keywords: Microfinance, Financial Efficiency, Social Efficiency, DEA and SADC
    JEL: G20 G21
    Date: 2021–04
  3. By: Olaiya, Taiwo
    Abstract: Studies on the promise that federalism holds in terms of constituting political order by way of devolutionary mechanism in a plural society and the seemingly elusive management of diversity in African federal states are in the legions. However, scanty attention has been devoted to the ethnicity cog constraining the management of diversity in spite of the promising roles of federalism in the federal states of Africa. The article examines the dominant political and socio-cultural realities that shape the management of diversity in African federal states. Four mutually reinforcing factors— uncritical state-making, political entrepreneurship and elitist power plays, ethno-regional nationalisms, and prebendal politics— undermining federal practices and, ultimately, exacerbating the management of diversity are reported. The article also considers relevant empiricism and critical conceptual questions that emerge from ethnicity in Africa. Empirical illustrations are restricted to Nigeria and Ethiopia: Africa’s appreciably largest federations.
    Date: 2021–03–31
  4. By: Andreas Freytag (Friedrich Schiller University Jena, University of Stellenbosch, STIAS, and CESifo Research Network); Muhammad Faraz Riaz (Government College University Faisalabad, Pakistan)
    Abstract: Corruption is one of the world’s most widespread political problems. It can be found on international, national and sub-national level. Access to education and other socio-economic services is of utmost importance for all humans. It is still not exclusively based on merit, but often rather unfairly distributed and allocated depending on corrupt local bureaucrats. We utilize a micro level measure of corruption based on the personal experiences of individuals, which realistically represents the linkage between individuals and public office holders. For the empirical analysis, we utilized the Afrobarometer survey of 36 African countries that contains information of more than 50,000 citizens. Corruption is found being negatively correlated with the access to water, education, health and paved roads, while positively associated with access to sewage system and having no significant association with access to electricity grid. The findings reveal that in order to expand the access to basic socioeconomic services, governments need to control corruption in public offices on a daily basis.
    Keywords: Development, Corruption, Local Services
    JEL: H1 K4 O1 O5 P4
    Date: 2021–02–02
  5. By: Erlend Berg; Michael Blake; Karlijn Morsink
    Abstract: Households in developing countries commonly engage in risk sharing to cope with shocks. Despite this, the residual risk they remain exposed to - often due to aggregate events such as droughts and floods - is considerable. To mitigate these risks, governments, NGOs and multilateral organizations have introduced index insurance. To appreciate its welfare implications, however, we need to assess how insurance interacts with pre-existing risk sharing. We ask to what extent the demand for index insurance - as compared to standard indemnity insurance - depends on the level of pre-existing risk sharing. We contribute by developing a simple theoretical framework which shows that, relative to a state of autarky, risk sharing between agents increases demand for index insurance and decreases demand for indemnity insurance. In an artefactual field experiment with Ethiopian farmers who share risk in real life, we test and confirm these predictions.
    Date: 2021–04–09
  6. By: Tröster, Bernhard; Janechová, Eva
    Abstract: On the 1st of January 2021, African countries started the African Continental Free Trade Area (AfCFTA). It is a largely symbolic step toward the long-term goal of economic integration on the African continent. The integration process includes an extensive agenda that requires time and will affect the development in African countries in multiple ways. While studies typically report potential trade and welfare gains, the overall impact of the agreement depends on various factors. In this ÖFSE Briefing Paper, we (i) present the state of play in the AfCFTA negotiations and implementation, (ii) discuss the challenges for the AfCFTA based on the characteristics of African trade, and (iii) offer a critical assessment of economic impact studies. A positive contribution of the AfCFTA to the Agenda 2063 of the African Union requires appropriate policies to overcome the limitations and challenges of the integration process, in particular through coordinated industrial policies. These efforts should be supported by the European Union, including through adjustments to its current trade regime with African partners.
    Keywords: AfCFTA,trade liberalization,continental integration,Regional EconomicCommunities,Economic Partnership Agreements
    Date: 2021

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