nep-afr New Economics Papers
on Africa
Issue of 2021‒06‒21
six papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Aid and Institutions: Local Effects of World Bank Aid on Perceived Institutional Quality in Africa By Isaksson, Ann-Sofie; Durevall, Dick
  2. Infrastructure development as a prerequisite for structural change in Africa By Yselle F. Malah Kuete; Simplice A. Asongu
  3. Politics, Institutions and Tax Revenue Mobilization in West African Economic and Monetary Union (WAEMU) Countries By Yawovi Mawussé Isaac Amedanou
  4. Human Rights in Sub Saharan Africa: Understanding the Influence of Militarization, Governance and Democracy By Chimere O. Iheonu; Shedrach A. Agbutun; Chinedum J. Chiemela
  5. Foreign Bank Assets and Presence on Banking Stability in Africa: Does Strong and Weak Corporate Governance Systems under different Regulatory Regimes Matter? By Baah Aye Kusi; Elikplimi Agbloyor; Simplice A. Asongu; Joshua Yindenaba Abor
  6. The legacy of conflict: aggregate evidence from Sierra Leone By Tillman Hönig

  1. By: Isaksson, Ann-Sofie (Department of Economics, University of Gothenburg, and); Durevall, Dick (Department of Economics, University of Gothenburg)
    Abstract: Motivated by the lack of sub-national empirical evidence on the relationship between aid and institutional development, this study explores the local effects of World Bank aid on perceived institutional quality in African aid receiving countries. We combine geo-referenced data on the subnational allocation of World Bank aid projects to Africa over the 1995-2014 period with geo-coded survey data for 73,640 respondents across 12 Sub-Saharan African countries. To account for the endogenous placement of World Bank project sites, we compare the estimated effect of living near a site where a World Bank project was under implementation or completed at the time of the interview, to that of living near a site where we know that a World Bank project appeared after the survey date. The empirical results suggest a positive impact of World Bank aid on perceived institutional quality, as measured by citizens’ expressed willingness to abide by key formal institutions. This applies even if we consider overall World Bank aid, i.e. not just projects specifically targeted at institutional development. As may be expected, however, the estimated effects are more pronounced when restricting our attention to projects focusing on institution building. Notably, the observed effects concern finalized projects, not projects still under implementation, highlighting that institutional change is a slow process.
    Keywords: Aid; Institutions; Africa
    JEL: F35 O17 O19 O55
    Date: 2021–06–03
  2. By: Yselle F. Malah Kuete (University of Yaoundé 2, SOA, P.O. Box 1365); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Structural change is seen by development economics theorists as a driver of sustained and sustainable economic growth. African countries that have understood this prioritize structural change policies in their national development programs in order to reduce poverty and promote employment through commodity-based industrialization. How does infrastructure development contribute to this process? The purpose of this paper is to answer this question by examining empirically whether the state of infrastructure development in Africa stimulates structural change, understood as the development of the manufacturing sector. After outlining the state of infrastructure quality in the region, and discussing some theoretical channels through which this relationship might pass, we estimate fixed effects models from 52 African countries over the period 2003-2018. Results which are robust to controlling for institutional dynamics and the natural resource curse hypothesis suggest that structural change in Africa is optimized with the development of infrastructure, particularly energy and information and communication technologies. Among other policy implications arising from these findings, the establishment of partnership projects with other developed countries in terms of superstructure for enhanced industrialization is recommended.
    Keywords: N67, N77, C23
    Date: 2021–06
  3. By: Yawovi Mawussé Isaac Amedanou (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This paper argues that the main determinant of differences in tax revenue collection across countries are differences in political regimes and institutions. The evidence based on the 8 members States of West African Economic and Monetary Union (WAEMU) over the period 90-2017, clearly supports that tax collection leads to better economic institutions and more democratic political system. Thus, handle the problem of tax collection will entail a reform of these institutions and a democratization of the political regimes. Institutions, political regimes, and democracy significantly increase tax collection while autocracy reduces it. The findings turn out to be robust accounting for the potential endogeneity of various institutions and aid intensity through 2SLS estimates.
    Keywords: Political regime,Democracy,Autocracy,Institutions,Tax revenue,WAEMU
    Date: 2021–06
  4. By: Chimere O. Iheonu (Abuja, Nigeria); Shedrach A. Agbutun (University of Nigeria, Nsukka, Nigeria); Chinedum J. Chiemela (University of Nigeria, Nsukka, Nigeria)
    Abstract: This study provides empirical evidence on the impact of militarization, governance, and democracy on human rights in sub-Saharan Africa (SSA) for the period 2002 to 2018. The study employed the instrumental variable Fixed Effects model to account for simultaneity/reverse causality, and unobservable heterogeneity as well as the instrumental variable quantile regression with Fixed Effects to account for existing levels of human rights in SSA. Based on the Fixed Effects results, it is revealed that militarization significantly increases human rights violation in the region, while governance and democracy significantly improve human rights. Results from the quantile regression show that (1) the negative impact of militarization on human rights is observable across all quantiles, (2) the positive impact of the control of corruption on human rights is more pronounced in countries where the existing level of human rights is high, while political stability and rule of law exerts stronger impact on human rights in countries where the existing level of human rights is low, (3) the positive impact of democracy on human rights is stronger in countries where the existing level of human rights is high. Policy recommendations based on these findings are discussed.
    Keywords: Human Rights; Militarization; Governance; Democracy; Sub-Saharan Africa
    JEL: C21 C23 K38
    Date: 2021–01
  5. By: Baah Aye Kusi (University of Ghana Business School, Ghana); Elikplimi Agbloyor (University of Ghana Business School, Ghana); Simplice A. Asongu (Yaoundé, Cameroon); Joshua Yindenaba Abor (University of Ghana Business School, Ghana)
    Abstract: This study examines the effect of foreign bank assets and presence on banking stability in the economies with strong and weak country-level corporate governance in Africa between 2006 and 2015. Employing a Prais-Winsten panel data model on 86 banks in about 30 African economies, the findings on how foreign bank assets and presence influence banking stability in strong and weak corporate governance economies under different regulatory regimes are reported for the first time in Africa. The initial findings show that foreign bank presence and assets promote banking stability. However, the positive effect of foreign bank assets and presence is enhanced in economies with strong country-level corporate governance, while the positive effect of foreign bank assets and presence is weakened in economies with weak country-level corporate governance. After introducing different regulatory variables (regimes), it is observed that the enhancing effect of foreign bank presence and assets on banking stability in the full sample and economies with strong and weak country level corporate governance systems is deepened or improved under loan loss provision regulation regime. However, under the private and public sector-led financial transparency regulations, the reducing effect of foreign bank presence and assets on banking stability in economies with weak corporate governance systems is further dampened. These findings show that the relationship between foreign bank presence and assets is deeply shaped by corporate governance systems and regulatory regimes in Africa. Hence, policymakers must build strong corporate governance and sound regulatory regimes to enhance how foreign bank operations promote banking stability.
    Keywords: Stability; Foreign banks; Regulation, Corporate governance; Africa
    JEL: G0 G2 G3
    Date: 2021–01
  6. By: Tillman Hönig
    Abstract: This paper studies the general equilibrium impact of civil war in Sierra Leone. I first use an instrumental variable (IV) strategy and geographic conflict variation to estimate reduced-form effects. I show that civil war leads to affected areas having a higher share of workers in agriculture, fewer educated workers, and lower worker income. In order to explicitly take into account general equilibrium effects such as selective migration in response to the war, I then develop an economic geography model.
    Keywords: Conflict, Livelihoods, Structural transformation, Migration, Computable general equilibrium, Firm productivity, Human capital
    Date: 2021

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