Development Economics
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- ItemConflict and Input Misallocation in the Manufacturing Sector: Evidence from Ethiopia(African Economic Research Consortium, 2023-10-06) Ayele, Yohannes; Edjigu, Habtamu; Oostendorp, Remco H.This paper examines the impact of civil conflict on the functioning and accessibility of markets for production inputs and their allocation among manufacturing establishments. It uses the 2014-2018 annual census of Ethiopian manufacturing firms. We exploit the time and spatial variation in conflict intensity at the district (Woreda) level, and compare whether production input choices of Ethiopian large and medium manufacturing firms in the same sector differ across districts experiencing differential changes in conflict intensity. We find that conflict-induced distortion results in manufacturing firms substituting domestically produced for imported inputs. As a result, firms in high-conflict districts use a relatively lower value of foreign-produced materials and a relatively higher value of domestically produced ones in production. These distortions are likely among the microeconomic mechanisms through which conflict affects aggregate economic outcomes. Furthermore, we find that conflict intensity induces manufacturing firms to substitute non-production workers (skilled workers) with production workers (unskilled workers). Finally, we estimate the impact of conflict-induced input distortions on the output value of manufacturing firms and find that this distortion can account for about 40% of the fall in output value of firms in high-conflict districts.
- ItemConflict and Input Misallocation in the Manufacturing Sector: Evidence from Ethiopia(African Economic Research Consortium, 2023-10-05) Ayele, Yohannes; Edjigu, Habtamu; Oostendorp, Remco H.This paper examines the impact of civil conflict on the functioning and accessibility of markets for production inputs and their allocation among manufacturing establishments. It uses the 2014-2018 annual census of Ethiopian manufacturing firms. We exploit the time and spatial variation in conflict intensity at the district (Woreda) level, and compare whether production input choices of Ethiopian large and medium manufacturing firms in the same sector differ across districts experiencing differential changes in conflict intensity. We find that conflict-induced distortion results in manufacturing firms substituting domestically produced for imported inputs. As a result, firms in high-conflict districts use a relatively lower value of foreign-produced materials and a relatively higher value of domestically produced ones in production. These distortions are likely among the microeconomic mechanisms through which conflict affects aggregate economic outcomes. Furthermore, we find that conflict intensity induces manufacturing firms to substitute non-production workers (skilled workers) with production workers (unskilled workers). Finally, we estimate the impact of conflict-induced input distortions on the output value of manufacturing firms and find that this distortion can account for about 40% of the fall in output value of firms in high-conflict districts.
- ItemThe Effect of Intra-African Immigration on Productivity in Africa(African Economic Research Consortium, 2023-08) Gnimassoun, BlaiseContrary to popular belief, the majority of Africans who migrate stay in Africa. In a context of low trade openness between African countries and high differences in the prices of goods and factors, intra-African immigration could theoretically play an important role. This paper aims to study the impact of intra-African immigration on labour productivity in Africa, as well as its macroeconomic and sectoral components. Empirically, I rely on a panel of 187 countries, including 53 African countries, over the period 1990‒2019, and a gravity-based 2SLS approach to deal with endogeneity. The results show that intra-African immigration has a positive, significant, and robust impact on labour productivity in Africa. This impact is greater than the effect of immigration in a global sample, and essentially passes through the improvement in total factor productivity and capital efficiency. While immigration tends to deteriorate capital productivity in the world sample, intra-African immigration improves capital productivity in Africa. Furthermore, the results reveal that the service sector is the one that benefits from the positive effect of intra-African immigration in Africa.
- ItemExplaining Food Insecurity in Sub-Saharan Africa: The Role of Governance and Institutions(African Economic Research Consortium, 2023-08) Gafa, Dede; Chachu, DanielThe burgeoning literature on global food (in)security suggests that sub-Saharan Africa (SSA) is lagging behind the rest of the world despite a period of decline in the prevalence of severe undernourishment. Using panel data covering 34 countries in the region for the period 2000 to 2015, this study examined the correlates and causes of food insecurity in SSA with emphasis on the role of domestic food production, governance, and institutions. The paper also provides evidence on the mediating role of governance by examining how the quality of governance and institutions influence the effectiveness of domestic food production on food insecurity in the region. The paper uses an instrumental variable strategy. The findings suggest that domestic food production and improvements in governance quality, measured by economic freedom and government effectiveness, are fundamental drivers of food security in SSA. We also found that improving the quality of governance would enable countries to better translate domestic food production into reductions in the depth of food deficit and the prevalence of undernourishment. Nonetheless, in the absence of adequate domestic food production, governance reforms alone would be impotent in fostering food security in SSA.
- ItemMagnitude and Determinants of Trade Misinvoicing in Burundi(African Economic Research Consortium, 2023-08) Ndoricimpa, ArcadeThe study examines trade misinvoicing at both aggregated and disaggregated levels by major trading partners, and by major export and import commodities. Aggregated trade misinvoicing and disaggregated trade misinvoicing by major trading partners are computed using DOTS database of the International Monetary Fund (IMF) over the period 1970‒2019. Disaggregated trade misinvoicing by major trading commodities is computed using UN-COMTRADE database over the period 1993‒2019. The study shows that the most occurring practices in trade misinvoicing are export underinvoicing and import over invoicing. Exports of Burundi to most of its major trading partners are found to be underinvoiced, while imports of Burundi from its major trading partners are in general overinvoiced. The major trading commodities considered are found to be affected by trade misinvoicing to a great extent. Moreover, an empirical analysis of the determinants of those two common practices of trade misinvoicing indicates that financial incentives through tax fraud, civil conflicts, governance, capital account openness, the parallel market premium, and the real exchange rate, are the main determinants of export underinvoicing and import overinvoicing. Drivers of trade misinvoicing at product level were also analysed for some major export and import commodities. The main product-specific factors of trade misinvoicing are found to be the parallel market premium, the real exchange rate, governance, and civil conflicts. The study's findings suggest that reducing political instability, having a more open capital account, improving governance, as well as reducing taxes and duties, could be ways to reduce the extent of trade misinvoicing in Burundi. In addition, more effort is needed in ensuring systematic and transparent reporting of international trade transactions.