Development Economics

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Adoption and Impact of ICT on Labour Productivity in Africa: Evidence from Cross-Country Firm-Level Data
(African Economic Research Consortium, 2021-07-22) Vaumi, Achille Tefong; Leudjou, Roland; Faha, Chistophe Péguy Choub
This paper uses a large cross-country firm-level database that contains information of about 6,300 firms from 19 sub-Saharan Africa (SSA) countries, collected by the United Nations Industrial Development Organization (UNIDO) in 2010 and 2011, to assess the determinants of adoption and use of Information and Communication Technologies (ICT) in SSA firms, while controlling for the problem of censoring that would exist in the modelling of ICT-capital adoption choice. The gain obtained from the adoption of ICT-capital investment has been examined by estimating the impact of ICT-capital on labour productivity in adopters’ firms, while considering the role of Organizational Changes (OC). Compared to the Cobb-Douglas production function the Translog production function has been tested to be more adequate with our data. Unlike previous work on the estimation of a production function, and given the simultaneity between labour productivity and ICT-capital investments, the Instrumental Variables (IV) method, has been used to address this endogeneity problem. The descriptive analysis shows that East African firms, on average, adopt ICT-capital more than other Africans countries, while Southern African firms, on average, use ICT-capital more intensively than other sub-regions. Finally, we find that income, wages and firms’ size are significant determinants of ICT-capital adoption. Moreover, the study reveals that the impact of ICT-capital intensity on labour productivity in SSA countries is positive and statistically significant in the presence of OC, which is robust to several different specification tests
Adoption of Information and Communications Technology (ICT) in Industrial Firms in Cameroon
(African Economic Research Consortium, 2021-10-04) Fambeu, Ariel Herbert
The ICT revolution is already a reality for firms in developed countries and in many developing ones, especially that there is now solid evidence of how it has improved productivity and growth. But at the same time, the ICT penetration rate is still low in African firms. Using data on industrial firms in Cameroon, the present study is an attempt to establish the determinants of ICT adoption in the country. It uses a negative binomial model and a probit model selection bias correction. It transpires from the study’s econometric results that the size of the firm, the human capital of its employees, the proportion of its employees who are ICT-literate, its organizational practices, its manager’s qualities and its regional location are the determinants of its ICT adoption rate. However, their discriminatory effect diminishes over time. From the study’s results, lessons can be drawn that can guide the development of an ICT diffusion policy, not only for the firms in Cameroon, but also for those in other similar African countries with a slow rate of ICT diffusion.
Adoption of Innovations and Productivity of Enterprises in French-Speaking Sub-Saharan Africa: Case of Cameroon, Senegal and Ivory Coast
(African Economic Research Consortium, 2021-10-04) Dumas, Tsambou André; Ludwick, Ndokang Esone; Olive, Nganguem Armelle; Aline, Zobo
The productivity of firms is the result of many factors, including their ability to innovate. For most authors, innovation can be diversified into product, process, organization and marketing innovation. The objective of this work is to highlight the impact of the adoption of innovations on firms’ productivity in Cameroon, Senegal and Ivory Coast. This work is based on the survey “Determinants of firms’ performance in Francophone Sub-Saharan Africa: The case of Cameroon, Ivory Coast and Senegal” conducted among 1,897 companies (639 in Cameroon, 723 in Senegal and 535 in Ivory Coast ) in 2014 by the International Development Research Centre (IDRC). This work uses a methodology consisting of two blocks of equations with a repeating structure. By estimating these equations using the bivariate probit and Double Least Squares (DLS) methods, the study finds that technological and non-technological innovations are complementary and have important effects on productivity of firms. This complementarity is proof that technological innovation contributes better to productivity when it is accompanied by non-technological innovation and vice versa. However, the introduction of new products (or services) accompanied by new methods of organization and marketing have a greater effect on the productivity of enterprises.
Analysing Multidimensional Poverty in Guinea: A Fuzzy Set Approach
(AERC, 2020-04-27) Diallo, Fatoumata Lamarana
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.
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.
Brain Drain and External Imbalances in Sub-Saharan Africa
(African Economic Research Consortium, 2021-10-04) Coulibaly, Dramane; Gnimassoun, Blaise
The persistent nature of external deficits in sub-Saharan Africa (SSA) is a major concern. This paper examines the extent to which migration from SSA to OECD countries affects the dynamics of external balances in SSA countries. Based on panel regressions and gravity-based 2SLS estimation strategies on data from 46 SSA countries over the period 1990-2014, we establish that emigration — particularly of highly-skilled people — contributes to the persistence of external deficits in SSA countries. While emigration globally has a negative impact on the current account, only high-skilled emigration has a significant and robust impact. These findings are corroborated by the fact that highly-skilled individuals emigrate with their saving potential as suggested by t h e life-cycle theory. In addition, while remittances to home countries can help to compensate this negative effect of brain drain, our results show that highly-skilled emigrant’s contribution to remittances is less important compared to that of low-skilled emigrants. Therefore, policy makers in SSA countries should implement policies to attract more remittances, particularly from highly-skilled emigrants, in order to reduce their external imbalances or external financing needs.
Conflict 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.
Conflict 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.
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.
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
The Dynamics of Horizontal Economic Inequality in Countries Affected by Ethnic Conflict
(African Economic Research Consortium, 2021-07-19) Ndayikeza, Michel Armel
This paper examines the dynamics of horizontal inequality in countries that have experienced ethnic conflict. This contrasts with previous studies which have focused on the effect of inequality on conflict. Understanding how conflict affects inequality serves to shed light on reasons behind conflict recurrence and slow economic development. The complex relationship between inequality and conflict is analyzed using both quantitative information, i.e. DHS data from 36 countries for the time period 1986- 2018, and qualitative information, i.e. 6 country case studies. The focus throughout is on conflicts in which a rebel group claimed to fight the government on behalf of an ethnic group. The study also compares different inequality indicators suggested by the literature and provides arguments for why some of them should be preferred to others. Overall, the analysis shows that ethnic conflicts generally raise ethnic inequality. Furthermore, the way a conflict ends does not entirely determine the dynamics of horizontal inequality thereafter. The country case studies suggest that for a country to witness declining horizontal inequality following an ethnic conflict, these three conditions are important: (1) a swift victory of the rebel group; (2) financial resources to redistribute; and (3) a firm determination by the winner to redistribute. However, these conditions do not guarantee inequality decline. Therefore, the study suggests that it is important for policy makers to emphasize horizontal inequality reduction in the post-conflict period irrespective of how the conflict ended to avoid conflict recurrence.
Education and Economic Growth: Empirical Evidence from Nigeria
(African Economic Research consortium, 2020-11-16) . Irughe, Roland.I; Edafe, Joel; Eregha, Perekunah.B.
The nexus between education and growth as an engine for increased economic growth has continued to attract the attention of economists and policy makers. Experts observe that education has an impact on society, both at the micro and macro levels. However, education has not been given its rightful place in the case of Nigeria, as reflected in the nation’s budgetary allocations. The country is also characterized by dualism in every form, such as an oil and non-oil sector. This dualism is also reflected in the contributions to growth, as education impacts the components of growth differently. It is against this backdrop that this study examined the impact of different levels of education on different components of growth in Nigeria. Data for the study were sourced from Central Bank of Nigeria Annual Bulletins and the Nigerian Bureau of Statistics, as well as from the World Bank for the period 1970–2013. The Fully Modified Ordinary Least Square (OLS) and Dynamic OLS approaches were employed for the analysis. Education was captured by enrolment rates at different levels of schooling and completion rate, which revealed that different levels of education have positive impacts of varying magnitude on each of the components of growth, as well as on overall growth in Nigeria, but the magnitude of the impact from completion rates is much higher on overall growth. By implication, since completion rate explains growth at a higher magnitude than enrolment rates in Nigeria, the government should endeavour to provide modalities to curtail school dropouts in the education system as a measure to boost completion rates that will facilitate growth.
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.
Explaining Food Insecurity in Sub-Saharan Africa: The Role of Governance and Institutions
(African Economic Research Consortium, 2023-08) Gafa, Dede; Chachu, Daniel
The 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.
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
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.
The FDI-Growth Nexus: A Comparative Analysis of Resource-Rich and Resource-Scarce African Economies
(African Economic Research Consortium, 2022-07) Yimer, Addis
In an attempt to capture the impact that cross-country resource endowment differences may have on the FDI‒growth relationship, this study investigates the FDI‒growth nexus in Africa by categorizing the countries as resource-rich and resource scarce, for the period 2000‒2017. Thus, the study is a modest attempt to answer the following main questions: a) Do FDI inflows contribute to economic growth in the host country after controlling for endogeneity? b) Does being a natural resource-abundant/ scarce country alter the FDI‒growth nexus? Using a System GMM, both the direct and interaction effects of FDI on growth are investigated in a comparative framework across resource-rich and resource-scarce African countries. The results show that the effects of FDI on economic growth vary depending on resource richness of countries. While FDI is found to affect growth positively and significantly in resource-scarce African economies, no significant effect of FDI on growth is identified for the resource-rich category.
Formalization of Enterprises in Senegal, Benin and Burkina Faso: Segmentation Approach to Informal Entrepreneurs
(2022-03) Dieng, Abdou Khadre
This paper aims to identify the determinants of business formalization in West Africa, specifically in Senegal, Benin and Burkina Faso. The methodology used is based on a theoretical model on formality and a Logit model. We adopted the segmentation approach of informal entrepreneurs. We distinguished between the ambitious informal entrepreneur and the default or non-ambitious informal entrepreneur. In the three countries studied, the results showed the importance of access to business premises, firm productivity and the ambition of the informal entrepreneur on formalization. The age of the firm, access to ICT and the business environment have a significant influence on formalization only in Benin. The average level of education for employees is significant only in the case of Senegal
Heterogeneity in Returns to Schooling in Cameroon: An Estimation Approach Considering Selection and Endogeneity Bias
(African Economic Research Consortium, 2021-08-17) Njifen, Issofou; Aicha, Pemboura
The aim of this study is to show that the rate of the returns to education is not uniform, and that some people benefit most and others least from their education on the labour market. Using data from a survey on employment and the informal sector, the study provides evidence of the heterogeneity of the returns to education in Cameroon. By controlling for any selection bias attributable to endogenous choices of the employment sector in the school-to-work transition and the potential endogeneity of the education variable related to the individual unobserved heterogeneity, we used the ordinary least squares with robust standard errors and the quantile regression technique to estimate the Mincer earnings function. This estimation procedure based on the control function is suitable because of the robustness of the instruments used. Overall, the study found that the average rate of the returns of an additional year of education was 7.1%. The results of the quantile regression model showed that the returns to education differed according to the earnings quantile considered: they were highest for the highest-paid workers and lowest for the middle-income ones. In addition, the individual unobserved heterogeneity was observed to decrease the returns to education. The Wald test for the equality of coefficients significantly confirmed the heterogeneity of the returns to education by quantile. The study’s findings have many socioeconomic policy implications.

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