nep-afr New Economics Papers
on Africa
Issue of 2022‒10‒10
six papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. What Really Drives Economic Growth in Sub-Saharan Africa? Evidence from The Lasso Regularization and Inferential Techniques By Isaac K. Ofori; Camara K. Obeng; Simplice A. Asongu
  2. The Fiscal State in Africa: Evidence from a Century of Growth By Albers, Thilo N. H.; Jerven, Morten; Suesse, Marvin
  3. Is Education Neglected in Natural Resources-Rich Countries? An Intergenerational Approach in Africa By Rasmané Ouedraogo; Jean-Marc B. Atsebi; Regina S. Séri
  4. Mobile Money Taxation and Informal Workers: Evidence from Ghana’s E-Levy By Akua Anyidoho, Nana; Gallien, Max; Rogan, Mike; van den Boogaard, Vanessa
  5. Assessing tax relief from targeted investment tax incentives through corporate effective tax rates: Methodology and initial findings for seven Sub-Saharan African countries By Alessandra Celani; Luisa Dressler; Tibor Hanappi
  6. Tourism management synergies in Sub-Saharan Africa By Simplice A. Asongu; Mushfiqur Rahman; Richard Adu-Gyamfi; Raufhon Salahodjaev

  1. By: Isaac K. Ofori (University of Insubria, Varese, Italy); Camara K. Obeng (University of Cape Coast, Cape Coast, Ghana); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The question of what really drives economic growth in sub-Saharan Africa (SSA) has been debated for many decades now. However, there is still a lack of clarity on variables crucial for driving growth as prior contributions have been executed at the backdrop of preferential selection of covariates in the midst several of potential drivers of economic growth. The main challenge with such contribution is that even tenuous variables may be deemed influential under some model specifications and assumptions. To address this and inform policy appropriately, we train algorithms for four machine learning regularization techniques— the Standard lasso, the Adaptive lasso, the Minimum Schwarz Bayesian information criterion lasso, and the Elasticnet to study patterns in a dataset containing 113 covariates and identify the key variables affecting growth in SSA. We find that only 7 covariates are key for driving growth in SSA. Estimates of these variables are provided by running the lasso inferential techniques of double-selection linear regression, partialing-out lasso linear regression, and partialing-out lasso instrumental variable regression. Policy recommendations are also provided in line with the AfCFTA and the green growth agenda of the region.
    Keywords: Economic growth; Elasticnet; Lasso; Machine learning; Partialing-out IV regression; sub-Saharan Africa
    JEL: C52 C53 C55 O11 O4 O55
    Date: 2022–01
  2. By: Albers, Thilo N. H. (HU Berlin and Lund University); Jerven, Morten (Norwegian University of Life Sciences); Suesse, Marvin (Trinity College Dublin)
    Abstract: What is the level of state capacity in developing countries today, and what have been its drivers over the past century? We construct a comprehensive new dataset of tax and revenue collection for 46 African polities from 1900 to 2015. Descriptive analysis shows that many polities in Africa have been characterized by strong growth in fiscal capacity. As a next step, we explain this growth using a fixed-effects long-run panel setting. The results show that canonical state-building factors such as democratic institutions and interstate warfare can increase revenue collection, while government turnover reduces it. Access to external credit and foreign aid are even more important, and both negatively affect fiscal capacity. In addition, access to external revenues, especially from commodity exports and debt, moderates the operation of canonical state-building factors such as democracy and conflict. These insights add important nuances to established theories of state building. Not only are states in Africa more capable than hitherto thought, but the international environment shapes their capacity, both directly and indirectly.
    Keywords: fiscal capacity; Africa; statehood; resources; external finance;
    Date: 2022–01–29
  3. By: Rasmané Ouedraogo; Jean-Marc B. Atsebi; Regina S. Séri
    Abstract: The literature on the effects of natural resources on education is mixed and inconclusive. In this paper, we adopt an innovative approach by exploring the effects of mineral discoveries and productions on intergenerational educational mobility (IM), linking parents to the children education levels for more than 14 million individuals across 28 African countries and 2,890 districts. We find that mineral discoveries and productions positively affect educational IM for primary education in Africa for individuals exposed to the mineral sites and living in districts with discoveries. Specifically, the probability of upward primary IM increases by 2.7 percentage points (pp.) following mineral discoveries and 6.7 pp. following mineral productions. Downward primary IM decreases by 1.2 pp. following both mineral discoveries and productions. These positive effects are increasing for individuals born later after discoveries and productions, for males, and individuals living in the urban area. However, no significant effects are found for secondary and tertiary educational IM. Finally, we explore the income and returns to education channels through which mineral discoveries and productions affect educational IM.
    Keywords: Africa; Educational Intergenerational Mobility; Mineral Discoveries and Productions; Generalized Difference-in-differences; Natural Experiment; educational IM; mineral discovery; IM index; IM definition; stylized fact; Non-renewable resources; Mining sector; Natural resources; North Africa; East Africa; Southern Africa; Central Africa; upward mobility; mining production; tertiary IM
    Date: 2022–07–29
  4. By: Akua Anyidoho, Nana; Gallien, Max; Rogan, Mike; van den Boogaard, Vanessa
    Abstract: The use of digital financial services, including money transfers and mobile money, have expanded widely in lower-income countries in the past decade; 47 per cent of the population of sub-Saharan Africa (548 million) had a registered mobile money account in 2020, with 29 per cent of those accounts representing active users (Andersson-Manjang and Naghavi 2021: 8). Among lower-income countries for which data is available, the average number of mobile money accounts is more than double the number of commercial bank accounts. In many lower-middle-income countries, mobile money usage is the same or more than commercial bank usage (Bazarbash et al. 2020). Alongside this growth, governments have increasingly sought to tax DFS, rooted in deeper discussions about the role that technology can play in increasing tax revenue and strengthening overall state capacity (Fan et al. 2020; Okunogbe and Santoro 2021). While capturing revenue from DFS can come from many sources, mobile money taxes in particular have often been introduced due to the untapped revenue potential and the relatively convenient and easy nature of the tax handle (Lees and Akol 2021a) – particularly in relation to, say, corporate income taxes on financial service providers. As noted above, the search for revenue is often closely linked to a desire to capture revenue from workers in the informal economy, who are often framed as tax evaders.
    Keywords: Finance, Work and Labour,
    Date: 2022
  5. By: Alessandra Celani; Luisa Dressler; Tibor Hanappi
    Abstract: Corporate tax incentives reduce investment costs for businesses, which may affect investment and location decisions. They apply through different designs and interact with countries’ standard tax systems, often making it difficult for tax policy makers and researchers to compare their generosity and assess their impacts across countries. This paper develops a methodology to calculate forward-looking corporate effective tax rates (ETRs) summarising tax relief from investment tax incentives into comparable indicators. It presents ETR indicators for seven Sub-Saharan African countries. Empirical results show that tax incentives substantially lower corporate taxation across these countries. On average, tax incentives reduce ETRs by 30% in the food and automotive industries compared to the standard tax treatment. ETRs often differ among taxpayers in a same sector and country - by up to 55%. The most generous tax treatment is typically offered within Special Economic Zones, where tax incentives can reduce ETRs to near zero.
    Keywords: Corporate taxation, Effective tax rates, FDI, Sub-Saharan Africa, Tax incentives
    JEL: H25 H32 O14 F21
    Date: 2022–09–22
  6. By: Simplice A. Asongu (Yaounde, Cameroon); Mushfiqur Rahman (University of Wales Trinity Saint David, UK); Richard Adu-Gyamfi (Mo Ibrahim Fellow, International Trade Centre); Raufhon Salahodjaev (Tashkent, Uzbekistan)
    Abstract: The purpose of this study is to assess how some governance dynamics such as political stability and the rule of law modulate the incidence of some macroeconomic factors (i.e. domestic investment and trade openness) on tourism development. The focus of this study is on 47 countries in sub-Saharan Africa with data from 2002 to 2018, and the Generalized Method of Moments is employed as the empirical strategy. From the findings, synergy effects are apparent in the role of the rule of law in modulating domestic investment for tourism development in terms of tourism receipts. It follows that, for the sampled countries, promoting tourism development can be most effective if policies for enhancing domestic investment and promoting the rule of law are implemented simultaneously.
    Keywords: Tourism Management; Economic Growth; Sub-Saharan Africa
    JEL: O10 O40 Z3 Z32
    Date: 2022–01

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