Thematic Policy Briefs (English)

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Aid Fragmentation and Development Outcomes in Sub-Saharan African Countries
(African Economic Research Consortium, 2024-04-11) Dedehouanou, Sessinou Erick Abel
This study examined the fragmentation of official development assistance (ODA) in Sub-Saharan African countries and the role played by development outcomes. Initially, it analyzed the fragmentation of aid over the period 2000 to 2019 using the Theil index. On the donor side, it appears that fragmentation of aid from bilateral Development Assistance Committee (DAC) donors and bilateral non-DAC donors has decreased significantly in recent years. In addition, the aid provided by bilateral DAC donors has been less fragmented than that given by non-DAC bilateral donors. Several traditional donors and so-called emerging donors have contributed to the fragmentation of aid in Sub-Saharan African countries. As for aid recipients, the countries of Southern Africa or those belonging to the group of so-called fragile States have suffered less from aid fragmentation than their counterparts in Central, East, and West Africa and those belonging to the group of non-fragile States. We used an instrumental variables method and a panel quantile regression with non-additive fixed effect to assess the effect of the development factors on aid fragmentation. The results obtained validated that the fragmentation of aid can be reduced by better coordination of aid at the sectoral level and above all by internal development factors (structural transformation policies and equity in the use of resources). Indeed, no solution to the fragmentation of aid is possible without the implementation of structural policies to achieve a level of development capable of coordinating the action of donors and equity in the use of resources allowing the satisfaction of the needs of various social groups.
An Empirical Analysis of the Interaction between Monetary Policy and Commercial Bank Lending in Nigeria
(African Economic Research Consortium, 2024-04-11) Emekaraonye, Chukwunenye Ferguson; Dick, Emmanuel Ikechukwu; Agu, Chukwuma
Using a recursive structural vector autoregressive model and quarterly data from 1986Q1 to 2019Q4, this study examines the transmission mechanism from monetary policy instruments, specifically the monetary policy rate, base money, and nominal exchange rate, to outcome variables (prices and credit to the private sector) in Nigeria. The data showed structural breaks in 2004Q2, 2009Q3 and 2014Q3, which coincided with the 2004 banking consolidation, the 2009 Sanusi-led regulatory measures and the appointment of Godwin Emefiele as the Governor of the Central Bank of Nigeria in 2014. Accordingly, policy instrument transmission tests were conducted along three scenarios – 2004, 2009 and 2014 – to evaluate the changes that may have been imposed on the policy transmission mechanism by the reforms. Under the 2004 consolidation scenario, the reforms strengthened only the interest rate anchor (monetary policy rate), causing it to be effective in influencing credit to the private sector (CPS). Innovations in other monetary policy instruments led to insignificant responses in the outcome variables. Even base money, which previously impacted both prices and credit to the private sector, became insignificant and ineffective after 2004. Sanusi’s regime did not strengthen the impact of any of the monetary policy instruments on prices and credit to the private sector. Base money, that impacted outcome variables in some periods before 2009, became insignificant thereafter. Similarly, the 2014 development and sectoral support programmes under Emefiele also did not strengthen monetary policy instruments. Overall, the study affirms the position that monetary policy reforms may not always strengthen policy instruments to regulate or influence prices and credit to the private sector, especially when the transmission is indirect.
Analysing the Relationship between Innovation and Productivity: A Case Study of Senegalese Manufacturing Industries
(African Economic Research Consortium, 2024-04-11) Kane, Aboubacry
The objective of this study was to profile innovative companies and to examine the link between innovation and productivity in manufacturing firms in Senegal. It considered the interaction between various forms of innovation. Using a descriptive analysis of variance (ANOVA) approach and multivariate regression, the study found that although Senegal had a satisfactory level of technology adoption, an innovation deficit remained in the industrial sector, notably in research and development (R&D) activities. The study established that larger enterprises and firms that export their products are the most innovative. However, no significant relationship was found between the gender of the manager of the firm and the adoption of various forms of innovation. Furthermore, our results demonstrate that the choice to adopt innovation in an organization is positively related to improved labour productivity. Regarding the other types of innovation, no association was found. Our results suggest the need to develop strategies that integrate innovation in industrial policy to facilitate its adoption. They also suggest the need to undertake regular surveys of innovation in firms to better understand market trends, identify their strengths and weaknesses and facilitate decision making in terms of innovation.
Can Results-Based Financing Help Reduce Wealth-Based Disparities in Maternal and Child Health Outcomes in Zimbabwe?
(African Economic Research Consortium, 2024-04-11) Makate, Marshall; Mahonye, Nyasha
Results-based financing (RBF) programme evaluations in sub-Saharan Africa (SSA) have concentrated on quantifying the impact of such programmes on maternal and child health outcomes, worker satisfaction, and quality of care. Very few studies have considered assessing the effectiveness of these programmes from a distributive perspective. This study uses nationally representative data from the Zimbabwe demographic and health survey complemented with geographic location data. As a first step, the empirical approach quantifies wealth-related inequalities in selected maternal and child health outcomes using concentration indices at the district level. A standard difference-in-difference model complemented by kernel-based propensity score matching was used to consistently estimate the impact of the RBF programme on the equality of maternal and child health outcomes across socioeconomic gradients in Zimbabwe by comparing the changes in concentration indices between 2010 and 2015 in ten districts with RBF and thirty districts without the RBF programme for 12 indicators of access to maternal health care and nine indicators of child health outcomes. The results show that the RBF programme was associated with greater and significant improvements in equity related to several outcomes. These outcomes included: prenatal care use (four or more prenatal care visits), family planning, quality of prenatal care (blood pressure checks, iron tablets, and tetanus toxoid vaccinations), child full immunizations, and treatment for fever occurring in the two weeks before the survey. The RBF programme did not appear to ameliorate wealth-related inequality in terms of child low birth weight, neonatal mortality, stunting, diarrhoea prevalence, treatment for diarrhoea, and fever prevalence. A sensitivity check of the estimates indicate that our results are weakly robust to the consideration of absolute measures of inequality (slope index of inequality and the generalized Gini index). From a policy perspective, the results have important implications for public health policies geared towards improving access to maternal and child health care services in developing countries. Our analysis reveals that RBF programmes do not necessarily eliminate wealth-related inequality in maternal and child health outcomes in Zimbabwe but are certainly a useful complement to equity-enhancing policies in the country.
Conflict and Input Misallocation in the Manufacturing Sector: Evidence from Ethiopia
(African Economic Research Consortium, 2024-04-11) 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 using 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.
Crop Diversification, Household Nutrition, and Child Growth: Empirical Evidence from Ethiopia
(African Economic Research Consortium, 2024-04-10) Tesfaye, Wondimagegn Mesfin
Recently, there is a resurgence of interest in crop diversification as a strategy to deal with a variety of issues, including malnutrition in the context of a changing climate and poorly developed markets. However, the empirical evidence base to justify this policy position is thin. This research seeks to contribute to the growing literature and the policy discourse by providing empirical evidence on the impact of crop diversification on child growth using panel survey data, combined with historical weather data. The study finds that crop diversification has a positive but small impact on child growth. Results from analysis of heterogeneous effects POLICY BRIEF Crop Diversification, Household Nutrition, and Child Growth: Empirical Evidence from Ethiopia Wondimagegn Mesfin Tesfaye October 2023 / No.795 2 Policy Brief No.795 show that the positive effects are more pronounced in areas with limited access to markets. The study demonstrates that the positive effects of crop diversification on child growth could be mediated through its positive impacts on household diet diversity, diet quality, and income.
Explaining Food Insecurity in Sub-Saharan Africa: The Role of Governance and Institutions
(African Economic Research Consortium, 2024-04-10) Gafa, Dede; Chachu, Daniel
The burgeoning literature on global food (in)security suggests that sub-Saharan Africa (SSA) is lagging 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 report 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 POLICY BRIEF Explaining Food Insecurity in Sub-Saharan Africa: The Role of Governance and Institutions Dede Gafa and Daniel Chachu October 2023 / No.797 2 Policy Brief No.797 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 to 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. The paper further suggests that finding the right balance between State interventionism and market oriented policy reforms is essential to promote food security among African countries
Facilitating Regional Trade: Lessons from WAEMU and EAC on How to Increase Trade in CEMAC
(African Economic Research Consortium, 2024-04-10) Bertrand, Nguenkwe Ronie
This study explores the ways of facilitation and enhancing intra- Central African Economic and Monetary Community (CEMAC) trade, which has remained structurally weak over more than twenty years, by focusing on the East African Community and the West African Economic and Monetary Union (WAEMU). The study uses a descriptive analysis of trade and the indicators of facilitation of trade in those three communities. An econometric analysis of factors underlying the level of trade in those three communities is conducted using an augmented gravity model. The econometric results demonstrate that the number of POLICY BRIEF Facilitating Regional Trade: Lessons from WAEMU and EAC on How to Increase Trade in CEMAC Nguenkwe Ronie Bertrand October 2023 / No.807 2 Policy Brief No.807 documents and the number of days required to export has a negative and significant impact on trade in EAC and WAEMU, but a positive impact in CEMAC. Infrastructure services, notably the use of the Internet have a negative impact on intra-zone trade in EAC
Financial Inclusion and Resilience to COVID-19 Economic Shocks in Nigeria
(African Economic Research Consortium, 2024-04-11) Adeniran, Adedeji P.; Muthinja, Moses M.
We examine the role of financial inclusion, ownership of bank accounts, and previous use of formal financial saving facilities as a resilience factor in the effect of COVID-19 on households' welfare in Nigeria. Using a novel data set that tracks food security among families in Nigeria before and during COVID-19, we find a negative effect of COVID-19 on welfare. The impact is more severe among male-headed households, those living in the southern region of Nigeria, and lower educated households. We also test how financial inclusion mitigates this effect through a triple difference analysis in which the households that are financially included and in non-agricultural sector are considered as the treatment group. Financial inclusion did not support resilience to shock among non-agricultural homes. Given the magnitude and multisectoral dimension of the COVID-19 shock, financial inclusion was not enough to mitigate the effect. This, therefore, points to a role for stronger government support in a large shock like COVID-19.
Financial Inclusion and Entrepreneurship in Six sub-Saharan African Countries: Evidence from Finaccess and Finscope Survey Data
(African Economic Research Consortium, 2024-04-10) Gakpa, Lewis-Landry
This paper investigates how financial inclusion affects individuals' decisions to start businesses in the context of six sub-Saharan African countries, using micro-data from the FinScope and FinAccess surveys. To do so, we use an instrumental variable (IV) technique to assess the empirical relationships. Overall, the results reveal that access to both banking services, formal non banking services, informal financial services and mobile money services positively and significantly influenced the decision to start businesses in the six countries. Furthermore, although the results show that a range of both demand POLICY BRIEF Financial Inclusion and Entrepreneurship in Six sub-Saharan African Countries: Evidence from Finaccess and Finscope Survey Data Lewis-Landry Gakpa October 2023 / No.793 2 Policy Brief No.793 and supply side barriers prevent individuals from accessing banking services for entrepreneurial purposes, supply side constraints are the most common barriers to individuals starting a business. In view of the above, policy interventions should first aim at creating an enabling environment to increase people's access to all types of financial services and secondly, address both supply and demand side constraints to promote entrepreneurship and economic growth. All of these measures should be aimed at increasing the level of financial inclusion with a view to stimulating entrepreneurial activities, which are the real pillars in the development and poverty reduction process in sub-Saharan African countries.
Financial Openness and Remittances: Evidence from Sub-Saharan Africa
(African Economic Research Consortium, 2024-04-10) Effiong, Ekpeno L.; Asuquo, Emmanuel E.
Does financial openness matter for remittances? Are the effects of financial openness on remittance dependent on the levels of financial and institutional development? This paper investigates these questions using panel data for 31 sub-Saharan African countries over from 1990 to 2015 and using a dynamic panel system generalized method of moments (GMM) estimation technique. The results show that financial openness, albeit having a declining effect, does not significantly influence the inflow of remittances into the region. In contrast, when conditioned on the levels of financial development and institutional quality, POLICY BRIEF Financial Openness and Remittances: Evidence from Sub-Saharan Africa Ekpeno L. Effiong and Emmanuel E. Asuquo October 2023 / No.804 2 Policy Brief No.804 financial openness tends to significantly increase remittances. However, this effect declines with significant improvement in institutional quality and a well-developed financial sector. Thus, financial openness substitutes financial and institutional development in fostering remittances in the region.
Gender and Firm Performance in Africa: Does the Business Environment Play a Moderating Role?
(African Economic Research Consortium, 2024-04-10) Okumu, Ibrahim Mike; Nathan, Sunday; Bbaale, Edward
This paper examines the moderating role of the business environment in the relationship between the gender of the top manager and firm performance (measured as sales per employee), and whether female-managed firms perform better the higher the proportion of female employees in the firm. The paper uses World Bank Enterprise Survey data of 14,561 firms from 29 African countries collected between 2010 and 2016. The descriptive analysis reveals significant variation in the performance and experience of business environment constraints that disadvantage female-managed firms. Controlling for potential endogeneity POLICY BRIEF Gender and Firm Performance in Africa: Does the Business Environment Play a Moderating Role? Ibrahim Mike Okumu, Sunday Nathan and Edward Bbaale October 2023 / No.799 2 Policy Brief No.799 and country fixed effects, we show that female-managed firms are associated with lower performance compared to male-managed firms. Electricity outages, informal competition, and corruption account for the performance gap between female and male-managed firms. However, we show that large female-managed firms perform better than male-managed large firms. Overall, the results imply that strengthening Africa’s business environment is central to closing the performance gap between male and female managers.
Gendered Analysis of Households’ Uptake of Agricultural Technology, Production, and Food Consumption in Rural Nigeria
(African Economic Research Consortium, 2024-04-12) Ngozi, Atata Scholastica; Belmondo, Tanankem Voufo; Uchenna, Efobi; Emmanuel, Orkoh
The literature suggests marked gender inequality in the use of agricultural technology despite the availability of evidence that women could be as productive as men when given equal access to agricultural resources. This underscores an urgent need to consider improving women’s access to agricultural technology to ensure sustainable provision of food for all people and particularly those in developing countries. This study addresses two specific objectives: (a) it examines gender differences in households’ use of farm-level technology (herbicide, pesticide, and inorganic fertilizer) and (b) it assesses the impact of the uptake of agricultural technology on farm production and food consumption with particular attention to the gender of the household head. The results of the Three Stage Least Squares (3SLS) regression reveal that households’ uptake of agricultural technology has a significant positive effect on their dietary diversity and food consumption expenditure per capita due to increased farm production. While these results are consistent regardless of the gender of the household head, the extent of effects for female-headed households are almost twice those for male-headed households. Therefore, an essential policy implication of our result is that the government could use input subsidies to address some of the gender gaps with regard to agricultural technology access and use. Such efforts address any entrenched inequalities in women’s access to agricultural production resources and consider other socioeconomic factors such as education and landholding which contribute to gender inequality in agricultural technology uptake.
Global Value Chains and Industrialization in Africa
(African Economic Research Consortium, 2024-04-10) Nguekeng, Bernard; Mignamissi, Dieudonné
The objective of this study is to analyse the main effects of the integration of African countries in the global value chainsa (GVCs) on their industrialization level. To this effect, we have specified an industrialization equation that considers the economic characteristics of the continent. We have then estimated that equation by the system GMM estimator method on a sample of 51 African countries with panel data spanning the period 1996‒2018 sourced from international organization databases. The findings of the estimations are the following: (1) the participation and the position of African countries in GVC positively contribute POLICY BRIEF Global Value Chains and Industrialization in Africa Bernard Nguekeng and Dieudonné Mignamissi October 2023 / No.808 2 Policy Brief No.808 to their industrialization. The imports of intermediate goods facilitate the access to foreign machinery and technologies which stimulate local production. Furthermore, the position in value chains that are limited to assembling activities would also allow to achieve significant industrial progress; (2) the main factors influencing the indirect transmission of GVC to industrialization are the human capital and the physical capital; (3) the results are stable as shown by several robustness check tests related to different modalities of integration in GVC, to the conception of a new participation indicator in GVC, and to sub-regional specificities. Based on these results, we recommend policy actions to enhance participation, but also to improve the position in GVC, while at the same time an appropriate strategy would be designed to accumulate human capital and physical capital in the long term.
Habits, Rule-of-Thumb Consumption and Useful Public Consumption in sub-Saharan Africa: Theory and New Evidence
(African Economic Research Consortium, 2024-04-10) Francois, John Nana
I derive and estimate a structural consumption model for a panel of 34 sub-Saharan African countries from 1960–2018 to uncover three important aggregate consumption behaviours: habit formation, rule-of-thumb consumption, and the complementarity of government consumption in private utility. The following findings emerge: (1) There is evidence of habit formation in consumption. (2) Approximately 38% of consumers follow the rule of thumb of consuming their current income. This rule-of-thumb consumption behaviour in the data is driven by the period before the mobile POLICY BRIEF Habits, Rule-of-Thumb Consumption and Useful Public Consumption in sub-Saharan Africa: Theory and New Evidence John Nana Francois October 2023 / No.791 2 Policy Brief No.791 money era that emerged post-2000s. (3) Public consumption complements private consumption in an Edgeworth-Pareto sense. This suggests that increases in government consumption can stimulate aggregate demand via a positive marginal utility channel.
Health is Wealth: The Impact of Health Insurance on Multidimensional Poverty in Ethiopia
(African Economic Research Consortium, 2024-04-11) Haile, Kaleab K.
While previous empirical studies extensively examined the determinants of households’ health insurance (HI) uptake, little has been done to evaluate the accompanying impacts on household welfare and poverty incidence. This study bridges the existing gap in literature by examining the impact of HI on multidimensional household poverty. The data comes from the latest wave of the Ethiopia Socio-economic Survey (ESS) collected in 2018/19. The study uses propensity score matching and inverse probability weighted regression adjustment to even out the distribution of observed characteristics across purchasers and non-purchasers of HI. As these methods could not address simultaneity and self-selection biases, the study uses the endogenous switching analysis, which integrates HI uptake and multidimensional household poverty equations, considering the interdependencies among the equations and their relationships with relevant observed household characteristics. The results reveal that households’ uptake of HI significantly reduces their probability of being multidimensionally poor. Moreover, the heterogeneous impact assessments of this study show that the desired impact of HI is more pronounced among male-headed households, households with a majority of adult male members, and households in urban areas. This study sheds light on the role of universal health coverage through HI as a policy instrument in the fight against multidimensional deprivations in the context of sub-Saharan Africa.
Horizontal Equity in the Use of Maternal Health Services in Cameroon
(African Economic Research Consortium, 2024-04-11) Josiane, Saleu Feumeni
An equitable healthcare system should be the health policy goal of all countries. The objective of this study is to measure horizontal equity in the use of maternal health services in Cameroon from 2004 to 2018. Specifically, it aims to determine the level of inequity in assistance during delivery and in the intake of tetanus vaccine from 2004 to 2018. It identifies sources of inequity in assistance during delivery and at the intake of tetanus vaccine. To accomplish this, we used the indirect standardization of health care method and the 2004, 2011, and 2018 Demographic and Health Surveys. The results show that there are significant inequities in wealth, education, region of residence, and in access to the nearest health facilities. Furthermore, sociodemographic and economic inequities are associated with health care utilization inequities. A health policy implementation monitoring team is therefore essential if the observed inequities in the use of maternal health services in Cameroon are to be significantly reduced.
How Does Adoption of Mobile Money Technology Affect Child Labour and School Enrolment?
(African Economic Research Consortium, 2024-04-10) Massacky, Joseph B. Ajefuand Falecia
This paper analyses the impact of adoption of mobile money services on child labour and educational outcomes in Tanzania using an instrumental variables strategy. We identify heterogenous impacts across child’s gender and age, and we find a positive and significant effect of mobile money adoption on educational outcomes, but the results reveal a negative and significant impact on child labour in the farm and households. Moreover, using mediation analysis, we identify remittances and education expenditure as the potential pathways through which mobile money adoption affects child labour and educational outcomes. POLICY BRIEF How Does Adoption of Mobile Money Technology Affect Child Labour and School Enrolment? Joseph B. Ajefuand Falecia Massacky October 2023 / No.806 2 Policy Brief No.806 Overall, the results suggest that policies that increase mobile money adoption can be effective in improving child educational outcomes and lead to a decline in the incidence of child labour
Identification and Estimation of Quadratic Food Engel Curves: Evidence from Cameroon
(African Economic Research Consortium, 2024-04-10) Wirba, Ebenezer Lemven
In this paper we estimate quadratic food Engel curves using data from the 2001, 2007 and 2014 Cameroon household consumption surveys. To address potential mismeasurement of regressors, we employ the heteroscedasticity based identification strategy. Exploratory non-parametric analyses suggest quadratic forms for the food Engel curves. The regression results in this study confirm these patterns. At lower spending levels, unit increases in total spending increase the food budget share, while at levels above the spending thresholds unit increases in total spending reduce the food budget share. We POLICY BRIEF Identification and Estimation of Quadratic Food Engel Curves: Evidence from Cameroon Ebenezer Lemven Wirba October 2023 / No.809 2 Policy Brief No.809 also find evidence of major shifts in the quadratic food Engel curves over time. These findings suggest that reducing taxes on food items would be more beneficial to poor households.
Investigating the Gender Wage Gap in the Nigerian Labour Market: A Distributional Approach
(African Economic Research Consortium, 2024-04-12) Nwosu, Emmanuel O.; Orji, Anthony
This study investigates the gender wage gap in Nigeria by extending the focus of the existing literature in two ways. First, we apply an extension of the Oaxaca-Blinder decomposition that relies on recentred influence function (RIF) regressions to analyze the gender wage gap at all points along the wage distribution. Second, we investigate changes in the gender wage gap between 2003/2004 and 2018/2019. The results unambiguously show that there is a significant gender wage gap in favour of men in Nigeria. This gap is statistically significant at all points of the wage distribution. Over time, we find that most of the wage difference is significantly accounted for by the wage structure effect, while the composition effect accounted for the wage gap at the lower end of the wage distribution during 2018/19. We also found a general decline in the gender wage gap along the entire wage distribution. In 2018/19, the gap is bigger at the bottom than at the top of the wage distribution, which is evidence in favour of a sticky floor in the Nigerian labour market. In terms of the contributions of individual covariates, we found that urban residence, unionization, education, public sector employment, and wage employment in agriculture has a significant reducing effect on the wage gap in favour of women. To address the gender wage gap in Nigeria, policy should focus more on ways to improve human capital among women and ensuring women are not segregated in top positions at the workplace.

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