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The Devil is in the Details: On the Robust Determinants of Development Aid in G5 Sahel Countries
(African Economic Research Consortium, 2023-09-28) Bayale, Nimonka; Kouassi, Brigitte Kanga Kouassi
The authors are very grateful to the African Economic Research Consortium (AERC) for the financial support. Thanks to the Chair of thematic research Group C (Finance and Resource Mobilization) Victor Murinde (SOAS, University of London, UK) and our resource persons, including Issouf Soumare (Université Laval, Canada), Alessandra Guariglia (University of Birmingham, UK), Bo Sjö (Linköping University, Sweden) and Prosper Dovonon (Concordia University, Canada) for their insightful comments during the research phase, especially in the collection, analysis and interpretation of data. The lead author would also like to thank the United Nations Economic Commission for Africa (UNECA) for the use of their facilities during the completion of this paper as a Research Fellow with the Macroeconomic Policy Division (MPD) of the UNECA, Addis Ababa, Ethiopia. However, the views expressed are those of the author and do not represent that of the United Nations (UN) or the Central Bank of West African States (BCEAO) and the AERC. Finally, the authors are very grateful to the anonymous reviewers and the Editor-in-Chief of Comparative Economic Studies, whose comments have greatly improved this paper.
Gender and Firm Performance in Africa: Does the Business Environment Play a Moderating Role?
(African Economic Research Consortium, 2023-09-25) 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 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 large male-managed firms. Overall, the results imply that strengthening Africa’s business environment is central to closing the performance gap between male and female managers.
The Impact of Agricultural Productivity on Deforestation in Central Africa
(African Economic Research Consortium, 2023-09-21) Bakehe, Novice Patrick
This paper examines the effect of agricultural productivity on the environment, using deforestation as an example. We examined this relationship using a sample of nine countries in Central Africa, with data from the 1990s to 2020. The econometrics results show that an increase in agricultural productivity reduced the rate of deforestation in these countries. This suggests that policies that facilitate the adoption of modern inputs and investment in technology leading to an increase in yields from agriculture could lead to a reduction in the demand for agricultural land.
The Impact of Irrigated Agriculture on Child Nutrition Outcomes in Southern Ghana
(African Economic Research Consortium, 2023-09-21) Okyere, Charles Y.; Usman, Muhammed A.
Data from Agriculture-Water and Sanitation (AG-WATSAN) Nexus Project undertaken by the Center for Development Research (ZEF), University of Bonn, Germany, with funding from the Bill and Melinda Gates Foundation and from Dr. Hermann Eiselen Doctoral Programme of the Fiat Panis Foundation, are duly acknowledged. Financial assistance (Research Grant Number: RT20520) from the African Economic Research Consortium (AERC), Nairobi, Kenya, for writing this manuscript, is gratefully acknowledged. Comments from Dr. Abebe Shimeles (resource person) and conference participants of the 50th, 54th and 55th AERC Biannual Research Workshops greatly improved the content of this paper. The usual disclaimer applies in terms of attribution of research findings to the funding institutions. Finally, an earlier version of the report was published in the Water Resources and Economics journal.
Can Results-Based Financing Help Reduce Wealth-Based Disparities in Maternal and Child Health Outcomes in Zimbabwe?
(African Economic Research Consortium, 2023-09-19) 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 regarding child low birth weight, neonatal mortality, stunting, diarrhoea prevalence, treatment for diarrhoea, and fever prevalence. A sensitivity check of the estimates indicates that our results are weakly robust to considering absolute inequality measures (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 valuable complement to equity-enhancing policies in the country.
The Effect of Intra-African Immigration on Productivity in Africa
(African Economic Research Consortium, 2023-08) Gnimassoun, Blaise
Contrary 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.
Long-Term Effects of Free Primary Education on Educational Achievement: Evidence from Lesotho
(African Economic Research Consortium, 2023-08) Moshoeshoe, Ramaele
Many Sub-Saharan African countries have instituted Free Primary Education (FPE) policies, which significantly increase primary school enrolment rates in developing countries. However, school attendance is different from learning. The main questions that still beg for answers are whether the many children in school are learning and whether the FPE learning effects are long-lasting. This paper attempts to estimate the long-term effects of the FPE programme on educational achievement in Lesotho. The programme was implemented grade by grade, beginning with grade one school fees abolition in 2000. The timing of the implementation created changes in programme coverage across age (and grade) groups over time. I employ a semi-parametric difference-in-differences strategy that exploits these variations to identify the long-term effects of the FPE policy on educational achievement, using university examinations record data for student cohorts that are FPE-treated and those that are FPE-untreated. The results indicate that the FPE effect on academic performance is between 2 percentage points (statistically insignificant) and 20 percentage points (statistically significant at 1%).
Water Use and Agricultural Productivity Growth in Sub-Saharan Africa
(African Economic Research Consortium, 2023-08) Yannick, Djoumessi Fosso; Bergaly, Kamdem Cyrille Bergaly
Today, we are confronted with one of the greatest challenges of the 21st century: meeting the increasing needs of the population while reducing the damage caused by agriculture to the natural resources, namely water and land. Water is a complex resource, unlike a stable resource over human lifetime, such as land. To date, the empirical literature on the estimation of productivity in agriculture has disregarded water as an input. Given that it constitutes a necessary input, then its efficient use becomes a prerequisite condition. The main objective of this study was to investigate productivity growth in agriculture in sub-Saharan Africa, taking into account water as an input. The true-random Stochastic Production Frontier (SPF) was used to estimate the agricultural production function incorporating water as an input and to derive the total factor productivity (TFP) using a sample of 19 countries for the period 1991–2014. The results of the SFA model showed that the classical coefficients of the production function, including water endowment as an input, have a significant and positive impact on agricultural production growth after correction for the potential endogeneity bias. The average growth rate of TFP taking into account water as an input was estimated at 0.045% per year for the full sample period, a figure considerably lower than classical TFP estimated at an average rate of 1% per year. For the period 1991–2001, the rate was negative and estimated at -0.44% and 0.36% for the period 2002–2012. The higher performance in 2002–2012 may be due to the significant adoption of good agricultural practices along with technological advances that allowed for saving water (between -0.08% and -0.05% on average per year). Therefore it would be advisable to focus more on good practices in water saving, which are key to efficient use of water in agriculture.
Optimal Monetary Policy with Inflation, Output and Asset Price Volatility in an Open Economy
(African Economic Research Consortium, 2023-08) Wamalwa, Peter
This paper aims to establish optimal response of monetary policy to output, inflation, and asset price volatility in small open economies of Kenya and Ghana. The paper estimates a monetary policy response function for inflation, asset prices, and output volatility developed from a dynamic stochastic general equilibrium model using quarterly data from 2000 to 2018. The analysis shows that monetary policy accord inflation greatest weight Compared to output and asset prices. However, there are differences in the sensitivity of monetary policy across the economies, and hence price, output, and welfare outcomes. The prioritization of inflation stifles output growth more in Ghana than in Kenya due to high interest rate. Despite monetary policy prioritizing inflation in Ghana, average inflation is higher compared to Kenya. Results from dynamic optimization shows that, a consistent intervention in the economy to stabilize inflation, output, nominal exchange rate, and asset prices, achieves higher welfare.
A Poor Man’s Portfolio?
(African Economic Research Consortium, 2023-08) Mbara, Gilbert
Over the 10-year period between 2005 and 2015, Kenya experienced a significant decrease in both wealth and income inequality. This decline in inequality has been characterized by a fall in both the income and wealth shares of the POLICY BRIEF A Poor Man’s Portfolio? Gilbert Mbara July 2023 / No.GPIR-PB-CC003 richest members of the population, as well as modest gains for the poorest. This is contrary to what has been observed in many advanced countries where inequality has been on the rise. To understand why the Kenyan experience has been different, we investigate macroeconomic variables linked to top-end income and wealth inequality.
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.
Magnitude and Determinants of Trade Misinvoicing in Burundi
(African Economic Research Consortium, 2023-08) Ndoricimpa, Arcade
The 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.
The Impact of Network Coverage on Adoption of Fintech Platforms and Financial Inclusion
(African Economic Research Consortium, 2023) Mothobi, Onkokame
We study the effect of mobile network coverage on adoption of financial technologies and financial inclusion. Using georeferenced survey data for nine sub-Saharan Africa countries combined with information on towers, we find that financial inclusion is positively influenced by coverage. We estimate that investment in Long-Term Evolution (LTE) towers to a radius of 2km per household would increase financial inclusion by 6% in Mozambique and 3% in Ghana, Rwanda and Senegal. In countries where mobile money is common, investment in Global System for Mobile Communications (GSM) and Universal Mobile Telecommunications System (UMTS) would have a larger impact on financial inclusion. We also find no gender disparities in digital financial inclusion. However, financial inclusion inequalities are still explained by differences in incomes, education level and location.
Crop Diversification, Household Nutrition and Child Growth: Empirical Evidence from Ethiopia
(African Economic Research Consortium, 2023-08-08) Tesfaye, Wondimagegn Mesfin
Recently, there has been 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 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.
The Impact of Conflict on Child Health Outcomes: Micro-Level Evidence from Nigeria
(African Economic Research Consortium, 2023-08-08) Oyinlola, Mutiu A.; Adeniyi, Oluwatosin; Adedeji, Abdulfatai A. Adedeji; Lipede, Omolola M.
Globally, the prevalence of conflicts has taken different dimensions due to exposure to different forms of conflict. Also, extant studies have linked conflict with health outcomes. However, existing studies face the challenge of comprehensive information on different conflict types. Thus, this study provides a comprehensive analysis of the impact of conflicts on child well-being in Nigeria. To achieve the goal, it classified the conflicts into three categories: aggregate, insurgency/terrorism, and herdsmen/farmers’ conflict. Furthermore, robust data are used by exploring four DHS waves (2003, 2008, 2013, and 2018) and integrating three conflict datasets using the MELTT technique. We present three steps of analysis for conflicts and child well-being based on this robust information. The impact of aggregate conflicts on child health outcomes, mechanisms, and across different groups was first investigated. Second, the impact of insurgency/terrorism on child health outcomes, mechanisms, and across different groups was examined. Third, the impact of herdsmen/farmers' conflict on child health outcomes, mechanisms, and across various groups was investigated. The results of a difference-in-difference approach suggest that proximity and exposure to different types of conflict worsened child health outcomes (infant mortality, height-for-age z-score, weight-for-age z-score and weight-for-height z-score). Also, vaccination,hospital visitation, and mother’s education are significantly affected by conflict types. Proximity and exposure to different conflict types forced people to migrate to less conflict-affected areas.
Do Schools Really Divide the Togolese?
(African Economic Research Consortium, 2023-07) Koudjom, Etayibtalnam; Ngoko, Eric H.; Limazie, Mazignada S.; Mafang, Lionie
Equality in education means that all young people, regardless of their background, socio-economic origin, and physical environment, should have equal opportunities to access the education system at all levels. Togo’s education system is characterized by a dichotomy of educational choices between government and private schools. The increase in the number of private schools since the liberalization of the education sector in the 1990s has led to a rapid growth in private schools throughout the country in general and in some of its regions in particular.
A Lifeless Help for the South Africans in Crisis
(African Economic Research Consortium, 2023-07) Omotayo, Abiodun Olusola; Ogunniyi, Adebayo Isaiah
COVID-19 has highlighted the critical role of adequate investments in the public health systems and comprehensive social protection programmes. Many South Africans suffer from a poor quality of life. The COVID-19 pandemic worsened the crisis, increased by the weak and poorly implemented social protection programs offered by the government. Hence, the central contention here was that poor health and income is disproportionately borne by the poor in South Africa and that such income related health inequalities appear to have become substantially more pronounced in the COVID-19 era relative to the pre-COVID-19 period. Despite the existence of the hypothesis of inverse relationship between the injection of the South Africa Social Security Grant (SASSG) on poverty status and income-related health inequality in some instances, we dwelled on the positive relationship between these variables. Therefore, we hypothesized that the economic dislocation caused by the COVID-19 disproportionately affects the South African poor.
Educated and Healthy, yet Poor
(African Economic Research Consortium, 2023-07) Edeh, Henry; Ozor, Jane
Nigeria has experienced significant economic growth over the past two decades, averaging 6% per annum in gross domestic product(GDP). The government has also made investments in education and health, resulting in improved national-level enrolment rates for school-aged children and lower under-5 and maternal mortality rates.However, poverty reduction in the country remains a challenge, with the poverty rate increasing from 35% in 2010 to 41% in recent time, 2019. Of particular concern are the regional disparities in the low standard of living between rural and urban settlements across the country. Pointedly, the northern region experiencing significantly lower standards as compared to the south. For a fact, this is evidenced in education and health outcomes which is the focus of this presentation.
Growing Apart and Falling Together: The Growing South African Story
(African Economic Research Consortium, 2023-07) Ngepah, Nicholas
Persistently high poverty and inequality compounded by increasing episodes of economic shocks, have been identified as a significant development issue, jeopardizing future poverty reduction efforts in post-apartheid South Africa. Despite relatively robust economic growth, poverty reduction has been slow, prompting a debate about the relationship between economic growth and poverty reduction. While economic growth is often seen as a key driver of poverty reduction, the relationship is complex and multifaceted, requiring further investigations, especially in the current context of rampant economic shocks. Economic growth alone is insufficient to reduce poverty significantly. The poor are vulnerable during economic downturns and require targeted policies. Existing social programs are helpful but insufficient The South African government has undertaken various programs to cushion the burden of poverty on the poor. These are among others, social grants, free healthcare and education services.
Re-Examining the Growth Poverty-Inequality Nexus in an Unstable Low-Income Economy: Case of Malawi
(African Economic Research Consortium, 2023-07) Chipeta, Chinyamata
Malawi suffers from a high incidence of poverty that has not fallen significantly over the last two decades. When the first integrated household survey was conducted in 1997/98, it was found that 54.1 percent of its population was living below the national poverty line. Six years later, the proportion of people living below the national poverty line had declined to 52.4 percent, before declining further to 50.7 percent in 2010. But, subsequently, it increased to 51.5 percent in 2016, then fell again to 50.7 percent in 2019. Thus, apart from the brief period when poverty rates decreased, the rate of poverty has been stagnant, fluctuating marginally. About one-half of the population of Malawi lives on very low incomes. These impoverished people suffer from food insecurity, undernutrition and poor health, have little education, live in environmentally degraded areas, and attempt to earn a meagre living on small and marginal farms or in dilapidated urban slums. In this policy brief, we set the stage for re-examining the problem of poverty in Malawi and how it can be reduced.