Development Economics

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Analysis of the cost of infrastructure failures in a developing economy: The case of the electricity sector in Nigeria
(African Economic Research consortium, 2005-02-04) Adenikinju, Adeola
Infrastructure has been identified as the key constraint to private sector development in Nigeria. Hence, this study analysed the cost of power outages to the business sector of the Nigerian economy using both a survey technique and revealed preference approach. One strong outcome of the study is that the poor state of electricity supply in Nigeria has imposed significant costs on the business sector. The bulk of these costs relate to the firms’ acquisition of very expensive backup capacity to cushion them against the even larger losses arising from frequent and long power fluctuations. Small-scale operators are more heavily affected by the infrastructure failures as they are unable to finance the cost of backup power necessary to mitigate the impact of frequent outages. The smallscale operators that could afford to back up their operations have to spend a significant proportion of their investment outlay on this. The study advocates for institutional reforms of the power supply sector in Nigeria.
Rural Non-Farm Incomes and Poverty Reduction in Nigeria
(AERC, 2011-01) Awoyemi, Taiwo Timothy
The study examines some of the factors which determine the type of non-agricultural activities in rural Nigeria an individual engages in. It is argued that diversification from subsistence farming and support for rural on-farm employment opportunities could be poverty-reducing. It has been noticed that an increase in foreign remittances reduces the incidence, depth and severity of poverty in developing countries. This study considers remittances as a source of incomewhich could possibly reduce poverty in the rural sector of the economy.We focus on the non-farmsector because of its potential for development and poverty alleviation in Nigeria.
The Impact of Property Land Rights on the Production of Paddy Rice in the Tillabéry, Niamey and Dosso Regions of Niger
(African Economic Research consortium, 2011-01-08) Maman, Maman Nafiou Malam; Soumana, Boubacar
Food security is one of the major challenges that countries like Niger must take up. Of all the cooperatives set up in Niger, those dealing with rice production, which are the subject of the present study, are the most interesting from the point of view of peasant organizations. In this respect, farmed land belongs to the state which distributes irrigated plots to beneficiaries who are owner farmers, often identified through a socioeconomic survey. The present study, while showing that being a tenant has a positive and significant impact on rice production, argues for greater and more responsible involvement of the state through an autonomous rice board charged with renting land for rice production. The study recommends avenues for achieving food security by increasing the production of rice through increasing the land area for irrigation and allotting land for rice growing to those who can farm it.
Investment in Technology and Export Potential of Firms in Southwest Nigeria
(African Economic Research consortium, 2011-02-03) Adeoti, John Olatunji
This study investigates investment in technology by firms in Southwest Nigeria, and how technology investment-related factors affect the export potential of firms. Data for the study was obtained from a survey of firms carried out between June and August 2008. The results demonstrate that investments in technology among the research sample firms are dominated by imported technologies, and investments in technology are not directly targeted at improving the export potential of firms. 84.4% of firms use either completely foreign technology equipment or equipment that are largely foreign technology. No firm uses completely locally fabricated production facility. Foreign direct investment in manufacturing is rare, and technology collaboration is largely in the form of technical support agreement and technology licensing. The application of ICT is most pronounced in customer relations management and office automation, while only 30% of the sample firms have invested in equipment/machines with computer aided manufacturing function. Only about 10% of the respondents consider improvement of export capacity a most important motive for technology investments. The results also demonstrate that firm size has a strong positive relationship with export potential, and it is the most important factor that affects the export potential of firms. The coefficient of firm size is the only parameter estimate that is consistently statistically significant at 1% level for all four export models estimated. Other technology investment-related factors that impact positively on export potential include skills intensity ratio, investment in skills upgrading, and investment in quality management.
Social Capital and Household Welfare in Cameroon: A Multidimensional Analysis
(AERC, 2011-08) Tabi Atemnkeng, Johannes
This study uses instrumental variables (IV) to investigate the causal influence of social capital on various welfare measures. The data set consists of a cross sectional data of the 2007 Cameroon Household Survey. Social capital variables are derived by memberships in social and cultural organizations, and five other associations. We found valid instruments for social capital at the aggregate level to determine its causal effect on household poverty as measured by household per capita expenditure, and on children schooling or enrolment. At individual level, the causal effect of social capital on labour force participation is determined. Social capital is found to increase household welfare and reduce poverty as well as raise children enrolment. It was also established that social capital has a beneficial causal influence on individual labour force participation. Estimates also suggest that the impact of social capital on household income and labour force participation are underestimated when correction for omitted variables bias is not taken into account. Generally, our analysis suggests that policy makers interested in improving the living conditions of households may be advised to consider promoting social capital as one relevant ingredient to achieve the Millennium Development Goals of reducing poverty by half.
Corruption at Household Level in Cameroon: Assessing Major Determinants
(AERC, 2012-08) Timnou, Joseph-Pierre; Feunon, Dorine K.
Corruption is a major blight on modern society. It is acute in sub-Saharan Africa, a region that has suffered economic ills for many years. It is difficult to tackle the problem due to its politically sensitive nature. Indeed, top officers are viewed as generally corrupt. Corruption is a topical issue in almost all countries in the region. Nevertheless, relevant empirical research is lacking, especially in countries where corruption is rampant. Existing studies highlight illegal practices in trade, finances, international relations, etc., but there are still many aspects to be addressed. Cameroon is one of the most corrupt countries in the world, although the situation is improving each year according to the Corruption Perception Index issued by Transparency International. Today, the fight against corruption is part of the government agenda but important changes are yet to come. The household survey carried out in 2001 examined elements of corruption in common household domains like health, education, security and other services including external community variables. This can be termed petty corruption. This paper tries to explain if there are large differences between communities that can be explained by community variables. Simple analysis using two variables shows important variations in the level of petty corruption, notably according to regions (increasing from rural to urban areas) with the poor being less likely to give bribes. Using multivariate analysis it appears that: a) modernization is associated with petty corruption; b) political environment does not really matter, except the influence of city councils; c) expenditure and level of education do not show similar trends; d) civil servants are not associated with bribe giving; and, e) positive impacts are found with age, number of years of education, low level of education and Islam. Some results observed with multivariate analysis contradict those found with bivariate analysis. All in all, although community variables can explain differences in petty corruption, household characterizations are equally important. This is just an outline of corruption practices in Cameroon. Its foundation lies on a few variables whose measure is not perfect. For further research, it is necessary to enlarge the scope of the study and improve the measurement aspect. Nevertheless, the results can help make better decisions to reorient the fight against such bad practices, since corruption is recognized as a deterrent to development, especially when it becomes systemic.
Threshold Effects in the Relationship between Inflation and Economic Growth: Evidence from Rwanda
(African Economic Research consortium, 2015-03-02) Rutayisire, Musoni J.
It is now widely agreed among economists, policy makers and central bankers that the main objective of macroeconomic policy is to achieve a high and sustained economic growth rate while maintaining a low inflation rate. It is also believed that high inflation has an adverse effect on economic growth. But how low should the inflation rate be not to impact negatively on economic growth? Monetary authorities in Rwanda have been targeting an inflation level of around 5% for economic policy purposes. Was this inflation target the most appropriate for economic growth? Recent studies have demonstrated that, depending on the structure and level of development of the economy, inflation becomes detrimental to economic growth when it exceeds a certain threshold. Below this threshold the impact of inflation on growth is non-significant or even positive. Against this backdrop, this paper assumes a non-linear relationship between inflation and economic growth and attempts to identify the existence of threshold effects between these variables in the case of Rwanda using a data set spanning the sample period 1968–2010. The existence of a threshold level above which inflation has an adverse effect on economic growth in Rwanda has been investigated by means of a quadratic regression model and the ordinary least squares technique. The results showed that at low levels inflation does not hurt economic growth, while at higher levels inflation reduces economic growth. The estimated inflation threshold level is 12.7%. As the findings of this study have unveiled the estimated threshold inflation rate consistent with economic growth in Rwanda, they would provide some useful guidance to economic decision makers in designing a more appropriate macroeconomic policy
Extractive Industries and Corruption: Investigating the Effectiveness of the EITI as a Scrutiny Mechanism
(African Economic Research consortium, 2016-10-12) Kasekende, Elizabeth; Abuka, Charles; Sarr, Marr
Anecdotal evidence and resource curse literature suggest that many countries have failed to exploit their natural resource wealth to finance the growth of their economies. Developing countries appear to be most affected. It is believed that poor governance, lack of transparency, poor accountability to their citizens, and corruption are the main culprits. In 2002, an international initiative sponsored by the UK government and backed by activist groups launched the extractive industries transparency initiative (EITI) with a view to mitigating the potential negative effects of resource wealth. The objective of this study is to investigate the effectiveness of this initiative that has gained much traction over the past decade as a scrutiny mechanism that fosters corruption control. In particular, this paper addresses two key questions: First, what are the observable factors that lead a country to voluntarily join the EITI? Second, do members of the EITI show greater improvement in corruption control relative to non-members? Our results indicate that poor countries and countries perceived as corrupt are more likely to join the EITI to signal their commitment to greater transparency and to improve their investment climate. Furthermore, the results suggest that corruption scores have so far not improved as a result of EITI membership using the control of corruption index developed by the World Bank.
Internet Adoption and Use in Cameroon
(African Economic Research consortium, 2017-04-05) Bakehe, Novice P.; Fambeu, Ariel H.; Piaptie, George B. Tamokwe
The aim of this study was to analyse the changes in the determinants of Internet adoption and use in Cameroon. The study used two individual surveys carried out in 2008 and 2015. Using discrete choice models and a comparative analysis, the study was able to highlight three major results. Firstly, following the emergence of equipment that was more compatible with third-generation (3G) mobile technology (smartphones and tablets), possessing a “traditional” mobile telephone, which could enable Internet adoption in 2008, was no longer relevant in 2015. Other factors, such as being unemployed or possessing a laptop, which were not significant in 2008, had an impact on Internet use in 2015. Secondly, most of the socio-economic and social network factors which influenced Internet adoption and use in 2008 were still relevant in 2015. The key factors were the respondent’s education level, his/her age, and the number of Internet users in his/her social environment. Finally, the study found that the coefficients associated with the marginal effects of most of these invariant factors increased over time both in the Internet adoption and Internet use models. This means that as the Internet penetration rate increased and the means used to have Internet access became more diverse, the first-level and second-level digital divides tended to worsen. These results are likely to help the government develop and implement more effective digital policies aimed at promoting mass Internet use in Cameroon. One will think first and foremost of policies aimed at training and informing the people who do not have Internet access. However, it could also be policies that target those who already use the Internet but are “isolated”, and who do not have access to information and expert advice in their vicinity, and, who, as a consequence, use the Internet in a sub-optimal way and are likely to be disappointed.
The Impact of the Liberalization of Petroleum Product Prices on the Economy of Cameroon
(African Economic Research consortium, 2018-03-23) NGUETSE, Pierre Joubert; TAKAMGNO, Célestin SIKUBE; NEGUEM, Éric Ledoux
This paper addresses the issue of the impact of liberalization of petroleum product prices on Cameroon’s economy, particularly on its macroeconomic aggregates, public finances and people’s living standards. It uses a methodology based on a Computable General Equilibrium model constructed from the Social Accounting Matrix of 43 activity sectors and 43 products. The results of the study show that the oil refining industry is the main channel through which fluctuations in crude oil prices on the international market affect the economy of Cameroon. If the price of oil per barrel is high, it is preferable, both on the economic level (growth, employment and public revenues) and the social level to maintain a low level of subsidies below 15% and, as a matter of priority, to re-allocate the economies made on these subsidies to social transfer-payment schemes and to measures aimed at sustaining the middle class’s purchasing power. But if there is a sharp fall in crude oil prices (below US$ 50 per barrel), a liberalization of the retail petroleum product prices could have positive effects on economic growth, on labour supply and on poverty reduction. The paper recommends the following: (i) a reduction in the country’s dependence on imports of crude oil by restructuring the national refining company; (ii) restructuring of the petroleum product price subsidy policy by adopting an inclusive approach; (iii) a setting up of a special fund for re-allocating the economies made on subsidies to financing targeted social programmes; (iv) diversification of exports and; (v) a setting up of a strategic structure to monitor the trends in and the forecasts of the prices of Cameroon’s main exports on the international market
Estimating the Size and Trends of the Informal Economy in Ghana
(AERC, 2018-12-01) Ocran, Matthew Kofi
The purpose of this paper is to quantitatively examine the evolution of the informal economy over the past four decades. The study used the currency demand approach as analytical framework for the assessment. The findings suggest that there has been an upward trend in the size of the informal economy as a proportion of the officially recorded GDP. For instance, the size of the informal economy as a proportion of the official GDP estimates increased steadily, from 14% in 1960 to 18% by 1977. The proportion fell thereafter and started picking up again from 1983 to a new high of 30% between 2003 and 2004. The outcome of the study has policy implications particularly for the design of effective monetary and fiscal policy and the selection of appropriate policy instruments.
Assessment of Vulnerability to Persistent Deprivation: Evidence from A Peripheral Pastoralist Population in Ethiopia
(AERC, 2019-10-17) Berhanu, Wassie
This paper examines household vulnerability to poverty in a traditional pastoralist society inhabiting a peripheral dryland environment. The extent and determinants of vulnerability to poverty among a pastoralist population in southern Ethiopia is examined based on single cross-section consumption data and asset-based approaches. A considerable segment of households that are vulnerable is the non-poor, which implies that the conventional stance of targeting the currently poor alone is not enough. In aggregate, results for this sampled peripheral population generally indicate trends inconsistent with Ethiopia’s recent macroeconomic developments of remarkable growth performance and falling poverty rates. Overall, the prevailing status and trends signify the need for comprehensive long-term programme design that equally embraces poor and non-poor pastoralists.
Sector of Economic Activity and Poverty in Benin
(AERC, 2019-10-17) Alinsato, Alastaire Sèna; Houedokou, Wilfied
This study, based on the theory of labour market segmentation, assesses the participation in the labour market in connection with poverty status. Using cross-sectional data from the household standard living condition survey of 2006 and k-means algorithm, the paper shows that the labour market in Benin comprises five segments. These are characterized by irregular workers, rural vulnerable independent, rural competitive salaried, urban competitive salaried, and a mixed group of protected employees and independent with capital. The paper presents a poverty profile for each segment. The rural vulnerable independent segment and that of the rural competitive salaried proved to be the poorest. The poverty status was estimated with a continuous censored dependent variable with selection controlled for by the conditional probabilities deriving from a multinomial logit. Results show the presence of unobserved factors affecting participation in segments that influence poverty status. The study suggests that poverty in the labour market is addressed by moving away from the traditional subdivision of the labour market in formal and informal markets. The study recommends that the labour market be considered as a set of heterogeneous segments in terms of poverty status and employment characteristics. This sub-division into a segment goes beyond simple formal-informal classification..
Political Instability, FDI and Economic Growth in Sub-Saharan African Countries: Evidence from Modelling Dynamic Simultaneous Equations
(AERC, 2020-01-08) Gakpa, Lewis Landry
The aim of this study is to examine the consequences of interaction between political instability and foreign direct investment (FDI) on economic growth of 31 countries in Sub-Saharan Africa in order to analyse one of the channels through which political instability affects economic growth. To achieve this objective, the study relies on a dynamic panel procedure and the Three Stage Least Squares Method to estimate a model of simultaneous equations over the period 1984-2015. The empirical results indicate that political instability affects economic growth directly and indirectly through its impact on foreign direct investment. We also highlight the simultaneous character of the relationship between political instability and the level of economic development in Sub-Saharan African countries. The results of the study then corroborate the idea that political instability hinders growth and thus calls for measures to improve the quality of political climate, which is one of the conditions necessary for a country’s economy to benefit from foreign direct investment.
Performance of Small and Medium-sized Enterprises in Uganda: the Role of Innovation
(AERC, 2020-01-15) Okumu, Ibrahim Mike; Buyinza, Faisal
Using the 2013 World Bank Enterprise Survey data for Uganda, this paper employs the quintile estimation technique to explain the relationship between innovation and firm performance in small and medium-sized enterprises (SMEs). Innovation involves the introduction of a new or significantly improved production process, product, marketing technique or organizational structure. Our results indicate that individual processing, product, marketing and organizational innovations have no impact on labour productivity as proxied by sales per worker. However, the results indicate the presence of complementarity between the four types of innovation. Specifically, the effect of innovation on sales per worker is positive when an SME engages in all four types of innovation. Even then the complementarity is weakly positive with incidences of a negative relationship when using any combination of innovations that are less than the four types of innovation. Policy-wise the results suggest that efforts to incentivize innovation should be inclusive enough to encourage all four forms of innovation.
Explaining Wellbeing and Inequality in Cameroon: A Regression-Based Decomposition
(AERC, 2020-04-27) Arrey, Marinus Arrey
This study sets out to estimate the determinants of household economic wellbeing and to evaluate the relative contributions of regressed-income sources in explaining measured inequality. In particular, a regression-based decomposition approach informed by the Shapley value, the instrumental variables econometric method, and the 2007 Cameroon household consumption survey, was used. This approach provides a flexible way to accommodate variables in a multivariate context. The results indicate that the household stock of education, age, credit, being bilingual, radio and electricity influence wellbeing positively, while rural, land and dependency had a negative impact on wellbeing. Results also show that rural, credit, bilingualism, education, age, dependency and land, in that order, are the main contributors to measured income inequality, meanwhile, the constant term, media and electricity are inequality reducing. These findings have policy implications for the ongoing drive to scale down both inequality and poverty in Cameroon
Analysing Multidimensional Poverty in Guinea: A Fuzzy Set Approach
(AERC, 2020-04-27) Diallo, Fatoumata Lamarana
Public Spending and Poverty Reduction in Nigeria: A Benefit Incidence Analysis in Education and Health
(AERC, 2020-04-27) Amakom, Uzochukwu
One of the functions that people usually expect a government to perform is to reduce inequality and poverty, and public spending is one way a policy maker works towards achieving such important task. Education and healthcare provision have been suggested as key sectors that help every policy maker achieve the above objective. The study evaluated public spending efforts in reducing inequality and poverty at all levels of these two sectors using the Benefit Incidence Analysis (BIA) in Nigeria. Findings from the study suggest that primary education and healthcare were more pro-poor in absolute terms than tertiary education and healthcare. Secondary education and healthcare reveal mixed results, while the findings suggests state, regional (geopolitical), location and gender biases in benefits from public spending for both education and healthcare. The study findings have an implication that income redistribution may be effected through subsidized government services, rather than through direct income or consumption transfers.
Determinants of regional poverty in Uganda
(AERC, 2020-04-27) Okurut, Francis Nathan; Odwee, Jonathan J.A.O.
The study sought in-depth knowledge of the key factors that account for regional poverty differentials in Uganda so as to contribute to more focused targeting of programmes for the poor. The research objectives were: to estimate the national and regional food poverty lines to identify poor households, to compare the socioeconomic and demographic characteristics of the poor households between and within the regions, to compute poverty indexes for Uganda based on national and regional food poverty lines, to identify the key determinants of regional poverty, and to derive policy implications for poverty alleviation in Uganda.With primary data from the Integrated Household Survey, 1992, the study used the Greer–Thorbecke methodology to compute poverty lines and poverty indexes. The logistic regression was used to analyse the key determinants of poverty and five models were fitted (one national and four regional). Northern Uganda was found to be the poorest region; it has the largest depth of poverty and worst inequality. It is characterized by the poor having large mean household sizes, least education, least mean household income, least expenditure on health, lowest chance of child survival and highest concentration in the rural areas. Educational level of household head, household size and migration status were found to be significant determinants of poverty at multivariate levels. The broad policy recommendation is that government should use regional poverty lines for the planning and budgetary allocation process for effective poverty alleviation
Oil Exploitation and Regional Disparities of Poverty in Chad: An Analysis of the Oil Revenues Redistribution Policy
(African Economic Research consortium, 2020-11-09) Gadom, Gadom Djal-; Kountchou, Armand Mboutchouang
This study aims to explore local disparities of poverty in Chad within a context of oil exploitation. Firstly, it analyses the regional poverty dynamics between 2003 and 2011 by decomposing poverty trends into growth and redistribution components based on the Shapley value framework. Secondly, the paper assesses the causes of disparities in poverty incidence between counties according to the amounts of oil revenue allocated with respect to their demographic weights. Then, a generalization of the Oaxaca-Blinder decomposition for poverty analysis, based on Yun (2004) approach is employed to decompose inter-county poverty difference into characteristics and coefficient effects. Data used come from the most recent Chad Household Consumption and Informal Sector Surveys (ECOSIT 2 and ECOSIT 3) carried out by the National Institute of Statistics, Economic and Demographical studies (INSEED). Administrative data on the amounts of direct oil revenues allocated throughout the country by the College for Control and Monitoring of Oil Revenues (CCSRP) are also used. Results highlight that high-speed economic growth following the oil boom has not really helped to reduce poverty, not only in Chad on the whole, but also at the regional level where important disparities in poverty dynamics are observed. Also, significant differences exist while comparing poverty incidence between counties in regard to the amounts of oil revenues allocated. The characteristics that explain these inter-county disparities of poverty are mainly education, labour market status and access to public services, especially water and healthcare facilities. Therefore, it is expected that the oil revenue redistribution policy would better promote economic inclusion in Chad if oil revenue allocated by the central government throughout the country would reflect the specific local development needs.

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