nep-afr New Economics Papers
on Africa
Issue of 2023‒03‒20
five papers chosen by
Sam Sarpong
Xiamen University Malaysia Campus

  1. What drives Bank Income Smoothing? Evidence from Africa By Ozili, Peterson K
  2. Impact of financial resources on agricultural growth in Sub-Saharan Africa By Nigo, Ayine; Gibogwe, Vincent
  3. The Fertility Transition in Sub-Saharan Africa: The Role of Structural Change By Büttner, Nicolas; Grimm, Michael; Günther, Isabel; Harttgen, Kenneth; Klasen, Stephan
  4. The future of EU blended finance and guarantees: An assessment of cooperation strategies with least developed countries in Africa By Lundsgaarde, Erik
  5. Conscientiousness and Labor Market Returns: Evidence from a Field Experiment in West Africa By Mathias Allemand; Martina Kirchberger; Sveta Milusheva; Carol Newman; Brent Roberts; Vincent Thorne

  1. By: Ozili, Peterson K
    Abstract: We investigate whether banks use loan loss provisions to smooth income and whether this behaviour is influenced by foreign bank presence, ownership and institutional quality differences across African countries. We examine 370 banks from 21 African countries from 2002 to 2021. We find evidence that African banks use LLPs to smooth their income when they are more profitable during economic boom or recession. Income smoothing is persistent (i) among banks with a widely dispersed ownership, (ii) among banks with strong government ownership and (iii) among banks with weak government ownership. Income smoothing is also persistent in African countries that have greater corruption control, better regulatory quality and political stability. In contrast, moderate concentrated ownership reduces bank income smoothing. Bank income smoothing is reduced in African countries that have strong rule of law, high government effectiveness, strong foreign bank presence and strong voice and accountability institutions. The implication is that effective corporate governance and institutional quality can constrain the extent of income smoothing by African banks.
    Keywords: Ownership concentration, foreign banks, income smoothing, loan loss provisions, Africa, institutional quality, banks, positive accounting theory, corporate governance.
    JEL: M40 M41 M42
    Date: 2023
  2. By: Nigo, Ayine; Gibogwe, Vincent
    Abstract: This study contributes to the literature on financial efficiency and growth. We show that banking development exerts a statistically significant and positive impact on local economic growth. We use the ARDL method to find the impact of institutional financial quality on agriculture sector growth in 14 Sub-Saharan African countries from 1990 to 2020. Our results show that land, rural population, and per capita agricultural income growth have long-run and significant (at 1% level) causal effects on the magnitude of agricultural value added as a percentage of GDP.
    Keywords: foreign direct investment, economic growth, absorptive capacity, human capital, market liberalization
    JEL: F36 F63 G21 O15 O19 O47 O55
    Date: 2023–01–23
  3. By: Büttner, Nicolas (ETH Zurich); Grimm, Michael (University of Passau); Günther, Isabel (ETH Zurich); Harttgen, Kenneth (ETH Zurich); Klasen, Stephan (University of Göttingen)
    Abstract: Despite the recent economic growth in many countries on the African continent, the region has seen a slow fertility transition. In this study, we explore whether the lack of structural economic change can explain this slow fertility transition. We create a unique panel data set combining Demographic and Health Surveys, Household Income Surveys, and nighttime light intensity data, as an indicator for industrialization, from 57 countries at the sub-national regional level over three decades to analyze the driving forces of fertility transitions across low- and middle-income countries. Our results confirm that household wealth, reduced child mortality, and female basic education are crucial for fertility reductions. Yet, our analysis also highlights the important role of increased female labor force participation in the formal sector, industrialization, increased female secondary education, and the expansion of health insurance coverage. Urbanization appears to have a limited, if any, effect. Our simulations indicate that if high-fertility countries in sub-Saharan Africa had experienced similar structural economic change as low- and middle-income countries with low fertility, their fertility levels could be up to 50% lower.
    Keywords: demographic transition, fertility, structural change, human capital, sub-Saharan Africa
    JEL: D13 J11 J13 J22 O12
    Date: 2023–02
  4. By: Lundsgaarde, Erik
    Abstract: The European Fund for Sustainable Development Plus (EFSD+) is a core element of EU development cooperation and reflects the EU's strong commitment to deploying blended finance and guarantees as development financing tools. This discussion paper examines the EU's intentions concerning how the EFSD+ will be integrated into geographic programmes, focussing on the least developed countries (LDCs) in Africa. Based on a review of the Multiannual Indicative Programmes (MIPs) for 30 African LDCs as well as the regional MIP for Sub-Saharan Africa covering the period 2021-2027, the paper provides an overview of funding reserved for EFSD+ implementation in geographic programmes, identifies the expected EFSD+ sectoral priorities and summarises references to development finance institutions (DFIs) as EFSD+ implementation partners. This descriptive review highlights issues for the future monitoring and assessment of the EFSD+. The paper points to uncertainty about the magnitude of the management challenge that EU institutions face in EFSD+ implementation given the difficulties of predicting the scale of guarantee-backed operations in individual countries, the lack of information on the expected volume of blended finance operations, and the limited analysis of how EFSD+ tools relate to other EU funding approaches. The paper also notes that EU institutions should be more explicit about the criteria shaping EFSD+ resource commitments to clarify relevant prerequisites for the effective deployment of EFSD+ tools. Finally, the broad thematic scope for EFSD+ use implies that knowledge about how blended finance and guarantees function and how the financing approaches interact with other interventions needs to increase throughout the EU system.
    Keywords: Africa, European development policy, development financing
    Date: 2023
  5. By: Mathias Allemand (University of Zurich); Martina Kirchberger (Trinity College Dublin); Sveta Milusheva (The World Bank); Carol Newman (Trinity College Dublin); Brent Roberts (University of Illinois at Urbana-Champaign); Vincent Thorne (Trinity College Dublin)
    Abstract: Non-cognitive skills are increasingly recognized as important determinants of labor market outcomes. To what extent specific skills can be affected in adulthood remains an open question. We conducted a randomized controlled trial with low-skilled employed workers in Senegal where workers were randomly assigned to receive a training intervention designed to affect conscientiousness-related skills. We found that treated workers were significantly more likely to stay in their job and have higher wages nine months after the intervention. Our findings suggest that non-cognitive skills can be affected even later in the life cycle and can have substantial labor market returns.
    Keywords: non-cognitiveskills, labormarkets, conscientiousness
    JEL: J24 M53 O15
    Date: 2023–01

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