nep-afr New Economics Papers
on Africa
Issue of 2022‒03‒14
five papers chosen by
Sam Sarpong
The University of Mines and Technology

  1. Oil rent, entrepreneurial start-ups, and institutional quality: Insights from African oil-rich countries By M. Ajide, Folorunsho; A. A. Soyemi, Kenny
  2. Cumulative Climate Shocks and Migratory Flows: Evidence from Sub-Saharan Africa By Di Falco, Salvatore; Kis, Anna B.; Viarengo, Martina
  3. Digital tools and agricultural market transformation in Africa: Why are they not at scale yet, and what will it take to get there? By Abay, Kibrom A.; Abate, Gashaw Tadesse; Chamberlin, Jordan; Kassim, Yumna; Spielman, David J.
  4. What Drives Financial Sector Development in Africa? Insights from Machine Learning By Isaac K. Ofori; Christopher Quaidoo; Pamela E. Ofori
  5. Foreign Direct Investment, Information Technology and Total Factor Productivity Dynamics in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo

  1. By: M. Ajide, Folorunsho (Department of Economics); A. A. Soyemi, Kenny (Department of Economics)
    Abstract: Objective: The objective of this study was to examine the moderating effect of institutional quality in the relationship between oil rents and entrepreneurial start-ups for oil-rich countries in Africa. Research Design & Methods: The study employed panel regression techniques that included instrumental variable (IV) estimator to analyse the data of 11 oil-rich countries in Africa over a period of 2006-2018. Findings: The following results emerged. (1) Oil rent’s impact is positive and significantly affects entrepreneurial start-ups. (2) The interactive coefficients of oil rents and institutional quality have a negative and significant impact on entrepreneurial start-ups. This means the quality of African institution reduces and leaks out entrepreneurial benefits of oil rents in African oil-rich countries. We establish that institutional quality’s threshold at which oil rent would accelerate entrepreneurial start-ups is 2.23 on a five-point scale. Implications & Recommendations: This study revealed that the ability of oil rents to consistently promote entrepreneurial development in oil-rich economies depends on the level of institutional conditions. This situation may create a growth trap for African oil-dependent economies because entrepreneurial start-ups depend on the quality of institutional foundations, which may position the growth inclusiveness and government actions on the right paths. In this context, our empirical findings reveal that African governments need to work on the institutional quality of their economies to reduce the institutional curse of oil rents on African entrepreneurial start-ups. Contribution & Value Added: The article advances our understanding on the nexus of entrepreneurship and oil rents. It is the first study conducted on oil-rich countries in Africa. Moreover, the work differs from the literature by examining the threshold level at which African institutional quality would meaningfully enhance positive relationship between oil rents and entrepreneurial start-ups.
    Keywords: Africa; institutions; new business entry; oil rents; panel-corrected standard errors
    JEL: M13 N97 O43
    Date: 2022–02–13
  2. By: Di Falco, Salvatore (University of Geneva); Kis, Anna B. (Graduate Institute of International and Development Studies, Geneva); Viarengo, Martina (Graduate Institute of International and Development Studies, Geneva)
    Abstract: We re-examine the effects of negative weather anomalies during the growing season on the decision to migrate in rural households in five sub-Saharan African countries. To this end we combine a multi-country household panel dataset with high-resolution gridded precipitation data. We find that while the effect of recent adverse weather shocks is on average modest, the cumulative effect of a persistent exposure to droughts over several years leads to a significant increase in the probability to migrate. The results show that more frequent adverse shocks can have more significant and long-lasting consequences in challenging economic environments.
    Keywords: climate shocks, rural-urban migration, economic development
    JEL: O15 O13 Q54
    Date: 2022–02
  3. By: Abay, Kibrom A.; Abate, Gashaw Tadesse; Chamberlin, Jordan; Kassim, Yumna; Spielman, David J.
    Abstract: Despite enthusiasm on the potential of digital innovations to transform agricultural markets in Africa, progress made thus far has been limited to small-scale experiments that often fail to scale up. Realizing the full potential of digital innovations—tools, technologies, applications, and services—in Africa requires not just further development of these solutions at meaningful scales, but also more nuanced evidence from both successful and unsuccessful scaling efforts. This paper reviews the theoretical and empirical evidence on the transformative potential of digital innovations for African agricultural markets with an in-depth examination of solutions that have been rolled out to date in the continent. Specifically, the review addresses the following questions: (i) how can digital innovations improve the functioning of agricultural markets in Africa? (ii) what explains the apparent failure of most pilots to scale up? (iii) what is required to realize their full potential? and (iv) what are the emerging risks and opportunities associated with these digital innovations for agricultural marketing? Although our review of the landscape and literature on market-focused digital innovations in Africa identifies several reasons to remain optimistic, the prevailing disconnect between pilots and scale-ups merits further evaluation. In particular, there is a need for more systematic assessments of both successes and failures at different stages of piloting and scaling of digital solutions.
    Keywords: ETHIOPIA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; digital technology; innovation; agriculture; markets; retail markets; market information services; digital divide; risk; food security; welfare; households; resilience; social protection; social safety nets; market information
    Date: 2021
  4. By: Isaac K. Ofori (University of Insubria, Varese, Italy); Christopher Quaidoo (Legon, Accra, Ghana); Pamela E. Ofori (University of Insubria, Varese, Italy)
    Abstract: This study uses machine learning techniques to identify the key drivers of financial development in Africa. To this end, four regularization techniques— the Standard lasso, Adaptive lasso, the minimum Schwarz Bayesian information criterion lasso, and the Elasticnet are trained based on a dataset containing 86 covariates of financial development for the period 1990 – 2019. The results show that variables such as cell phones, economic globalisation, institutional effectiveness, and literacy are crucial for financial sector development in Africa. Evidence from the Partialing-out lasso instrumental variable regression reveals that while inflation and agricultural sector employment suppress financial sector development, cell phones and institutional effectiveness are remarkable in spurring financial sector development in Africa. Policy recommendations are provided in line with the rise in globalisation, and technological progress in Africa.
    Keywords: Africa, Elasticnet, Financial Development, Financial Inclusion, Lasso, Regularization, Variable Selection
    JEL: C01 C14 C52 C53 C55 E5 O55
    Date: 2021–01
  5. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: Compared to other regions of the world, the potential for information technology penetration in sub-Saharan Africa (SSA) is very high. Unfortunately, productivity levels in the region are also very low. This study investigates the importance of information technology in influencing the effect of foreign direct investment (FDI) on total factor productivity (TFP) dynamics. The focus is on 25 countries in SSA. Information technology is measured with mobile phone penetration and internet penetration, while the engaged TFP productivity dynamics are TFP, real TFP, welfare TFP, and real welfare TFP. The empirical evidence is based on the Generalised Method of Moments. The findings show that, with the exception of regressions pertaining to real TFP growth for which the estimations do not pass post-estimation diagnostic tests, it is apparent that information technology (i.e. mobile phone penetration and internet penetration) modulate FDI to positively influence TFP dynamics (i.e. TFP, welfare TFP, and welfare real TFP). Policy and theoretical implications are discussed.
    Keywords: Productivity; Foreign Investment; Information Technology; Sub-Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2022–01

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