Working Paper Series

02-Jan-2020

Working Paper 330 - Labor Market Flexibility and Jobs in Selected African Countries

Africa enjoyed relatively fast economic growth over the past decade and a half. The sustained growth undoubtedly kindled hopes for a prosperous Africa. However, poverty and inequality remained pervasive. In 2013, poverty was still widespread, and the rate was high in Sub-Saharan Africa—41 percent, compared with the world average of just 10.7 percent and the South Asia average of 15 percent. While the intensity of poverty, measured by the poverty gap, declined from 26 percent to 16 percent during the same period, it is still high compared with the world average of 3.2 percent. Moreover, the...
02-Jan-2020

Working Paper 329 - Human Capital, Productivity, and Structural Transformation

The rate of poverty reduction is often synonymous with the rate of structural transformation—the reallocation of economic activities (labor, land, and capital) across the broad sectors of agriculture, manufacturing, and services. This long-term process is at the center of economic development, so much so that the speed at which countries transform their economies is often equated with the pace at which poverty declines (Duernecker and Herrendorf 2016; Herrendorf, Rogerson, and Valentinyi 2013; McMillan et al. 2014). Indeed, it was through this long-term process of shifting economic activities...
02-Jan-2020

Working Paper 328 - The Cost of Inaction: Obstacles and Lost Jobs in Africa

Africa has no shortage of labor supply. But it lacks high-productivity job opportunities in high- productivity nonagricultural sectors. Its relatively rapid and sustained economic growth over the past decade did not yield enough jobs for the growing wave of jobs seekers—mainly youth in urban areas. Nonagricultural employment continues to be dominated by the informal sector, where wages are low, benefits nonexistent, workplace safety absent, and labor exploitation common. With significant demographic change expected to bring pressure on African labor markets, the urgency of creating high-...
02-Jan-2020

Working Paper 327 - Poverty in Nigeria: A Multidimensional Approach

Nigeria, despite high GDP growth like its continental peers, is bedevilled by increasing poverty. Most studies, which define poverty in terms of income outcomes, describe this nexus between growth and poverty as non-pro-poor. A small but growing percentage of studies, which dominate the recent development literature and use a combination of income and non- income outcomes to measure poverty, describe this nexus as non-inclusive growth.
02-Jan-2020

Working Paper 325 - Unleashing the Potential of institutional investors in Africa

It has been estimated that financing the UN Sustainable Development Goals (SDGs) globally will require annual investment levels of USD 3-4 trillion, while in Africa associated investment needs are estimated at about USD 600-700 billion a year2. Given the enormity of the financing needs, during the Third International Conference on Financing for Development in Addis Ababa in July 2015, the global community tasked the multilateral development banks (MDBs) to significantly scale up their activities and leverage financial resources by moving from “billions to trillions”. As is the case globally,...
14-Nov-2019

Working Paper 326 - Youth Jobs, Skill and Educational Mismatches in Africa

Abstract: This paper contributes to the empirical literature on the incidence of skill and educational mismatches of African youth and explores the linkages between job mismatch and wages, job satisfaction, and on-the-job search. It uses school-to-work transition survey datasets from 10 African countries and controls for unobserved heterogeneity, sample selection bias and endogeneity problems during the estimation of job mismatch. Results show that skill and educational mismatches are prevalent in Africa: 17.5% of employed youth are overskilled, 28.9% underskilled, 8.3% overeducated and 56.9...
21-Aug-2019

Working Paper 324 - Public Investment, Time-to-Build, and Fiscal Stimulus

We study the macroeconomic impacts of public investment surges and fiscal policy adjustments to debt-financed public investment using a neoclassical growth model. We focus on two important issues that are pervasive in publicly financed investment projects in low-income countries: gestation delays and public investment inefficiencies. The model is estimated for a typical low-income country. Three central messages emerge. First, assumptions about which fiscal instruments may adjust to stabilize debt are crucial for the ultimate impacts of changes in fiscal policy. Covering the cost of the...
21-Aug-2019

Working Paper 323 - Mobile Financial and Banking Services Development in Africa

Using a new database for mobile financial & banking services across countries, we analyze pro-poor and inclusive growth in developing countries and show the importance of mobile financial & banking development. This paper uses several econometric techniques to investigate mobile finance & banking benchmarking, determinants, and real impacts on inclusive growth in developing countries in Africa. The statistical benchmarking analysis reveals that there is a positive link between mobile banking development and economic development. Estimation of our model, using different...
21-Aug-2019

Working Paper 322 - Managing Natural Resource Revenue in Ghana

It is well recognized that infrastructure investment is vital for growth. However, its financial implications could be huge, which could not be met by traditional sources of financing only. Using a general equilibrium model applied to Ghana, this paper combines four fiscal rules for managing oil revenue for public investment spending: i) the government combines both oil proceeds and borrowing (baseline experiment); ii) the government saves all oil proceeds and resort to borrowing (Bird-in-Hand experiment); iii) the government invests all oil proceeds and does not borrow (Hand-to-Mouth...
20-Aug-2019

Working Paper 321 - Determinants of Antenatal Care Utilization in Nigeria

The study examines the determinants of antenatal care Utilization in Nigeria. Determinants of antenatal care utilization were categorized into economic and non-economic determinants. Estimates of the determinants of antenatal care utilization were derived from two-part model analysis using five rounds of Nigerian Demographic and Health Survey (NDHS) from 1990 to 2013. Previous studies have used one or two rounds of surveys to estimate the determinants of antenatal care utilization using logit or count data (poison, negative binomial) model. However, health care utilization consists of two...
20-Aug-2019

Working Paper 320 - Hands Off Oil Revenues?Public Investment and Cash Transfers

Many resource-rich countries fare little better than their resource-poor counterparts because windfall income is often associated with misuses. We develop a small open-economy DSGE model to explore the policy response to oil windfall in Kenya, focusing on a scenario of transferring the resource revenues entirely to households versus two alternative fiscal rules: all-investing and sustainable investing. Our results show that transfers to households are welfare-improving while containing the pressure on public investment efficiency. However, the overall impact on the economy is negligible. The...
20-Aug-2019

Working Paper 316 - Resilience to Diverse Shocks and Stressors in Niger and Ethiopia

The concept of development resilience has become increasingly popular in recent years, in both research and policy circles. The primary regions of focus for resilience analysis and programming are those with both chronic and cyclical problems with food insecurity, that are susceptible to climate volatility (most commonly drought) as well as other shocks and stressors. This research focuses in on two countries that epitomize these concerns–Niger and Ethiopia – and examines the influence of climate and other shocks on indicators on wellbeing through a resilience lens. In particular, we explore...
20-Aug-2019

Working Paper 315 - Temperature and Children’s Nutrition: Evidence from West Africa

Wasting and stunting rates have been falling in subSaharan Africa since 2000 due to concerted efforts to improve children’s nutrition. However, this progress is at risk of faltering due to rising temperatures across the continent. High temperatures can affect children’s nutrition through heat stress, decreased agricultural production, and increased disease. In this paper, we test the hypothesis that temperatures above 30oC negatively affect children’s nutritional status as measured by standardized anthropometric measures. To do so, we merge anthropometric data from the publicly available...
20-Aug-2019

Working Paper 318 - A DGE Model for Growth and Development Planning: Malawi

It was Margaret Thatcher who said, “plan your work for today and every day, then work your plan". Yet many national development plans in Africa have failed because they were either not well planned or the plans were not well worked out. We present a fully specified medium-scale dynamic general equilibrium model that can be used as the macroeconomic framework for development planning. Structural peculiarities of low-income developing economies are emphasized, including limited access to credit markets by households, a prominent natural resource sector, limited labour and capital mobility,...
20-Aug-2019

Working Paper 319 - Performance de la microfinance en Afrique de l'Ouest

Le présent document analyse le lien entre la pérennité financière, l’étendue et la profondeur de la portée sociale d’institutions de microfinance appartenant à l’Union économique et monétaire ouest africaine (UEMOA). L’analyse est effectuée sur des données de panel de la période 2000 à 2014 à l’aide d’un modèle à équations simultanées dynamiques. Des résultats obtenus, il ressort une relation positive entre la pérennité financière et la profondeur de la portée sociale lorsque toutes les variables qui généralement influencent la pérennité financière sont incluses. D’autre part, relativement...
24-Jul-2019

Working Paper 317 - Women Self-Selection out of the Credit Market in Africa

Women are disproportionately disadvantaged in access to finance in Africa. While supply-side detriments, such as high interest rates and collateral requirements, are well documented in the literature, little is understood about how demand-side factors contribute to the observed gender gap in access to finance. This paper provides the first empirical evidence on how women managers’ perception about their creditworthiness contributes to the large gender gap in Africa, particularly in the Northern region. One of the innovations of the paper is introducing a theoretical model using the credit...
01-Jul-2019

Working Paper 314 - Within-Season Response to Warmer Temperatures: Defensive Investments by Kenyan Farmers

We present evidence that farmers adjust agricultural inputs in response to withinseason temperature variation, undertaking defensive investments to reduce the adverse agroecological impacts of warmer temperatures. Using panel data from Kenyan maize growing households, we find that higher temperatures early in the growing season increase the use of pesticides, while reducing fertilizer use. Warmer temperatures throughout the season increase weeding effort. These adjustments arise because greater heat increases the incidence of pests, crop diseases and weeds, compelling farmers to divert...
22-Feb-2019

Working Paper 308 - The Diaspora and Economic Development in Africa

While the dominant collective belief asserts that brain drain is detrimental to the development of small economies, new studies hold the reverse view. This paper aims at studying the role of the African Diaspora in the economic development of Africa. It analyzes both the overall effect and the specific effect of emigration according to the level of education of emigrants. Then, through a deeper investigation, the paper analyzes the main channels through which the Diaspora influences economic development in Africa. The results show that the African Diaspora contributes positively,...
27-Jun-2018

Working Paper 300 - Village Communities and Global Development

Theories of economic development should be based on a general understanding of how communities have been organized in traditional societies. For such a foundation, we consider some insightful observations about traditional autonomous villages and feudal manors by Henry Sumner Maine, a 19thcentury jurist who studied the history of Western law and the problems of India under British rule. Feudalism is the simplest way to integrate villagecommunities into a larger state system, but much of global poverty may be a legacy of feudal statebuilding. Economic development depends on political...
27-Jun-2018

Working Paper 301 - Structural Transformation, Deep Downturns, and Government Policy

Most recessions are a result of some shock to the economic system, typically amplified by financial accelerators, and leading to large balance sheet effects of households and firms, which result in the effects persisting. But, over time, the balance sheets get restored. Even banks recover. But episodically, the “shock” is deeper. It is structural. Among advanced countries, the movement from agricultural to manufacturing in the last century, and the more recent movement from manufacturing to the service sector reflect such a large economic transformation. The associated downturns are longer...