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2012

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Working Paper 164 - Closing the Education Gender Gap: Estimating the Impact of Girls’ Scholarship Program in The Gambia
26/12/2012 15:37
Working Paper 164 - Closing the Education Gender Gap: Estimating the Impact of Girls’ Scholarship Program in The Gambia
Universal primary education and the elimination of gender gap in enrollment rates are two of the targets in the Millennium Development Goals (MDGs). Achieving these goals has been a high development priority for sub-Saharan African countries over the past decade. The challenges in this sector remain significant. Approximately 32% of primary school age children do not attend school and 34% of all youths do not attend secondary school in sub-Saharan Africa (UNESCO 2012). In addition, the adult literacy rate in Africa is 62%, which is far lower than the global average (84%). The ratio of female to male enrollment at secondary level is 79%. The reality in The Gambia is a microcosm of the situation in the region as a whole. While enrollment rates have risen recently in The Gambia, they have been historically low. Average net enrollment rates in the country between 1999 and 2007 for primary, middle and high school levels were on average 61%, 30% and 16% respectively. These low enrollment rates have persisted despite the high rate of returns to education in the country (Foltz and Gajigo 2012). This paper estimates the schooling impact of a nation-wide scholarship program for female secondary school students. The program is funded jointly by the Gambian government, UNICEF, World Bank and the IMF (though the HIPC program) to help the country reach the MDG targets of reducing gender disparity in secondary school enrollment. In the regions where the scholarship program was implemented, all girls attending public (government-run) middle and high schools were exempted from paying school fees, which used to be mandatory. The program started in 2000 in few districts and then expanded across the country geographically (from east to west). This gradual expansion of the program in the initial implementation phases provides a unique opportunity to rigorously assess the causal impact of the scholarship program on educational outcomes. We use two nationally representative household surveys that were carried out in 1998 and 2002/03. In 1998, the program had not been implemented while in 2002, about half of the districts in the country had benefited from the project. This makes it possible to analyze the schooling impact of the program using difference-in-difference strategy – an impact evaluation strategy that is almost ideal to this setting. The results show that the program had a significant enrollment effect on female students of all student-age groups. Specifically, the program led to approximately 8 to 9 percentage point enrollment increase in middle and high school female students. In addition, the enrollment effect of the program on girls at primary level is significantly positive (about 9 percentage points), suggesting that the removal of school fees caused households to further increase female primary school enrollment in anticipation of lower future costs. Years of schooling attained increased by 0.3 to 0.4 for female students. We found no significant schooling effect (enrollment and years of schooling attained) of the program on male students at any level (primary, middle or high school). The estimated results are robust to policy changes that occurred in the country during the period of the scholarship program implementation that could have affected student enrollment. For example, there was a significant expansion in school construction in parts of the country. This possibly confounding effect is addressed by controlling for the number of schools at the district level.    This paper contributes to our understanding of the impact of abolishing school fees on enrollment and schooling attainment in Africa by providing precise estimates of the effects of user fee elimination for female students. This paper provides the first impact evaluation of enrollment of an almost nation-wide female scholarship program in Africa. More precise estimate of the impact of reducing schools is important for policy since it will enable governments to better assess the trade-offs involved in implementing similar policies.Read more
Working Paper 158 - Tackling Graduate Unemployment through Employment Subsidies an Assessment of the SIVP Programme in Tunisia
29/10/2012 11:28
Working Paper 158 - Tackling Graduate Unemployment through Employment Subsidies an Assessment of the SIVP Programme in Tunisia
It is widely agreed that the level of unemployment among university graduates in Tunisia contributed to the rise of social unrest that culminated in what is popularly dubbed as ‘the Arab Spring’. While the number of university graduates in Tunisia increased fivefold, so did the graduate unemployment rate. In 2009/10, one year prior to the Tunisian revolution, nearly one is four university graduates were unemployed.  High levels of unemployment are not unique to Tunisia. Countries in the MENA region including Egypt, Morocco and Algeria faced unemployment rates in excess of 18 percent, 19 percent and 21 percent, respectively. Although the causes of graduate unemployment in Tunisia are likely to be more frictional and solving the problem will require long-term interventions and structural change to the economy, active labor market policies were thought to alleviate some of the pressure in the short to medium term. Until recently, the main policy intervention aimed at promoting paid employment for graduates was the Stage d’ Initiation à la Vie Professionelle (SIVP). The program provided a wage subsidy ranging between TND equivalents of (€50 - €125) depending on qualifications. Firms receive exemption from taxes and national insurance contributions and can top up the graduate’s salary with tax free supplements. Eligibility for support requires registration with the national employment agency (ANETI) and actively seeking employment. Similarly, eligible firms should be part of the social security system and have intern-to permanent staff ratio not exceeding 40 percent. This paper assesses the impact of SIVP by addressing the non-random nature of selection into the program. The paper uses a variety of matching methods to estimate the welfare effect of the program. The dataset considered is a graduate tracer survey of over 4000 graduates who qualified for the program in 2004 and were interviewed in both 2005 and 2007. In spite of the non-random nature of selection into the program, graduate who benefited from the program are expected to have better labor market outcome that those that did not. The data show that women were slightly less likely than men to have benefited from SIVP in the first three and a half years after graduation. The distribution of SIVP by governorate of residence in 2004 shows a bias towards large urban areas (e.g. Tunis, Ariana, Nabeul and Bizerte). Those with ‘good’ or ‘satisfactory’ degree are more likely to benefit from SIVP as opposed to those with just a ‘pass’ or a ‘very good’ degree. At the level of discipline, those with Social Science, Law and Language degrees are considerably less likely to benefit from SIVP than those with Finance and Management degrees.   The study found that SIVP has a positive outcome on the likelihood of having a job (especially for those at high risk bracket of unemployment), but there is less strong evidence that the program has any effect on the likelihood of having a contract, or on salaries. SIVP beneficiaries are less likely to find employment with a large firm, and are more likely to enter the private sector. The multivariable analysis slightly lowers the estimate of the effect of the program on joblessness and unemployment but they remain statistically significant and stable across all specifications. SIVP participation results in an estimated reduction in the likelihood of joblessness of around 7 percentage points. However, although the program appears to increase the likelihood of obtaining a job, it does not appear to have any impact on the quality of that job.   One out of four individuals who spent zero or one month of unemployment in the first six months of graduation benefited more from the program than other individuals in their cohort. Similarly, one out of four individuals who spent five or six months of unemployment after the first six months of their graduation benefited more from the program than other individuals in the same cohort. The study finds that the program is poorly targeted and is therefore poorly targeted. Although the program should probably be kept, the targeting of the funds should be improved in order to minimize deadweight loss. The subsidy should be restricted to job-seekers who have been registered with ANETI and who, despite demonstrating job-seeking effort, have been unable to find work for a considerable period of time. The program should be better targeted geographically by removing the requirement that the company should be part of the social security system so that smaller, informal enterprises also become eligible to recruit SIVP interns.Read more
Working Paper 155 - Youth Jobs and Structural Change: Confronting Africa’s “Employment Problem”
08/10/2012 14:22
Working Paper 155 - Youth Jobs and Structural Change: Confronting Africa’s “Employment Problem”
Africa has enjoyed over a decade of sustainable growth where regional growth has exceeded the global average and per-capita income for the region is steadily increasing. During the past decade sub-Saharan Africa was home to six of the ten fastest growing economies in the world. However, there are signs that this growth turn-around has not resulted in robust growth of ‘good’ jobs particularly for the young whose share has been rising over time. The share of the youth in Africa is now higher than any other part of the world. This demographic transformation offers the possibility of a growth dividend, as in the case of Asia, if a rapidly growing work force can be combined with capital and technology. However, it can also present a major challenge. The continent is not creating the number of jobs required to absorb 10-12 million young people entering the labour market each year and as recent events in North Africa have shown, lack of employment opportunities in the face of rapidly growing young labour force can undermine social cohesion and political stability. According to a recent projection, Africa will have the largest workforce in the world by 2040, surpassing both China and India. The paper argues that sub-Saharan Africa does not face a severe employment problem but that of the absence of decent job opportunities. It argues thatAfrica’s employment problem is symptomatic of its lack of structural change –the shift in resources from lower to higher productivity uses. In spite of rapid growth, Africa has undergone very little structural transformation. While unemployment rates in most African countries are low, they also tend to have very large informal sectors, with a bulke of the employed langushing in vulnerable employment and working poverty. There is quite a bit of evidence that since 1990 structural change has moved in the wrong direction in Africa where labor has moved from higher to lower productivity employment.&nbsp; &nbsp; Youth unemployment rates in Africa compare favourably compared to regional and world averages. Worldwide there is a fairly regular relationship between the overall rate of unemployment and the rate of youth unemployment. However, at 1.9 the ratio of sub-Saharan Africa’s total unemployment to youth unemployment rate is below that which would be predicted from the region’s overall rate of unemployment. The global ratio of total unemployment to youth unemployment is higher (at 2.7). However, North Africa’s youth unemployment rate substantially exceeds its predicated value. The African Development Bank’s 2012 household and labour force survey with its coverage of 16 countries provides the most comprehensive picture to date of the performance of African labour markets. The survey finds considerable heterogeneity in Africa’s labour markets. These results confirm that neither overall nor youth unemployment rates in sub-Saharan Africa stand out globally, while variations across countries is significant.&nbsp; African countries with well-structured labour markets and a large formal sector tend to have higher unemployment rates. This is especially true in southern Africa where unemployment exceeds 15 percent in Botswana, Namibia, and South Africa. Unemployment is also high by international standards in North Africa – especially in Algeria and Tunisia. Unemployment is relatively low in lower income countries while the informal sector is large (Ethiopia, Ghana, Tanzania and Uganda). A third group comprises of countries with large informal sectors and unemployment rates in the range of five to 15 percent.&nbsp; &nbsp; In most African countries job search periods are longer for those with higher education levels and therefore tend to constitute a larger cohort of the unemployed. Except for Niger and South Africa, youth unemployment rates tend to be lowest among those with either no or basic education. In 6 of 14 countries for which data were available, the unemployment rate for those with tertiary education was the higher of all. In many African countries, self and informal employment accounts for a majority of young workers. With some country specific exceptions, less than 20 percent of Africa’s young workers find wage employment and over 70 percent of workers in Congo, DRC, Ethiopia, Ghana, Malawi, Mali, Rwanda, Senegal, and Uganda are either self-employed or find themselves in family work. The paper argues that the key to reducing unemployment and informality in all levels including the young is the rapid growth in good jobs as a result of substantial structural change. Industrialization can boost formal job creation through labour intensive growth. Nevertheless, critical changes in the labour market and in the education system will also be needed to increase the employment intensity of growth in the formal economy. In the short run a number of interventions can be undertaken to improve the employment prospects of new labour force entrants. <ul><li>Addressing open unemployment and helping the young find better jobs: Governments can target young workers in employment intensive activities, such as tourism and construction with programs that offer cash for work. Public works programs provide opportunities for young workers with low skills to acquire work experience and subsequently find more permanent work.&nbsp; </li><li>Building relevant skills: Increased emphasis on post-primary education through education budgets, improving the quality of teachers and instruction in public schools are critical. In the long-term it is essential to restructure education systems to teach the skills needed to succeed in a global marketplace. &nbsp;</li><li>Reform of labour legislatives and institutions: pertinent changes in labor regulations that set minimum wages determine social insurance contributions and protect job security need to be changed. In some countries high level of wages relative to productivity are deterrents to growth in outward-oriented manufacturing. In many countries procedures for laying-off workers for economic and technological reasons are complex and seldom used. Separating social insurance from formal job status and social contributions from formal sector wages should be an important long-term goal. </li></ul>Read more
Working Paper 149 - Accounting for Poverty in Africa: Illustration with Survey Data from Nigeria
14/05/2012 14:28
Working Paper 149 - Accounting for Poverty in Africa: Illustration with Survey Data from Nigeria
Apart from presenting the poverty profile, this paper examines the correlates of poverty with multivariate models that predict the probability of being poor using data from the Nigerian National Consumer Survey (NCS) of 2003/2004. The probability of a household being poor was examined for the nation as a whole, as well as for male-headed and female-headed households and for urban/rural geographical areas. The analysis is useful, first, to verify the relative role of the various factors in determining poverty status, and second, to recommend policy changes to reduce poverty incidence in the country. The probability of a household being poor was examined for the nation as a whole, as well as male-headed and female-headed households and for urban/rural geographical areas. It is argued that poverty increases at old age as the productivity of the individual decreases and the individual has few savings to compensate for this loss of productivity and income. It is also posited that women are more prone to poverty due principally to low education and lack of opportunity to own assets such as land. The literature shows evidence that large households are associated with poverty while showing that education lowers poverty. Location of residence also matters. In particular, due to more job opportunities in urban areas, poverty tends to be lower in urban than rural areas. It has been posited that a long-term marital relationship may mean higher permanent income and a larger build-up of consumer durables, reducing poverty while religion affects poverty since it embodies a great deal about a person's general approach and outlook to the world. To what extent these are relevant in Nigeria is an empirical question investigated in this paper. We present important stylized facts on trend oil wealth and democratic development in African counties. Africa’s oil reserves have maintained an upward trend, rising from 53.4 trillion barrels in 1980 to over 130 trillion barrels in 2012. Also, while most African countries legalized opposition parties and held competitive, multiparty elections, which, though, have often not met the minimal democratic criteria of freeness and fairness: they have therefore been &quot;pseudo-democracies&quot; or “virtual democracies”, with North Africa being mired in the trap of liberalized autocracy. We apply a multivariate analysis, using a logistic regression in accordance with the basic principles of discrete choice models on the 2004 data in order to explore the correlates of poverty in the country. The dependent variable is a dichotomous variable of whether the Nigerian household is poor (1) or not poor (0). Our results show that, in particular, the variables that are positively and significantly correlated with the probability of being poor nationally are: household size, lack of education, residence in the North Central zone, being single, and being a Moslem. The variables that are negatively and significantly correlated with the probability of being poor are: age of the household head, quadratic of household size, residence in an urban area, post-secondary (tertiary) education attainment, being a Christian, and residence in the south south, southeast, south west, and north east zones of the country. We recommend a number of policy interventions necessary to reduce poverty in Nigeria and similar African countries. These include: the continued intensification of the “solidarity” (a form of “social security”) with the Nigerian family system; intensification of family planning services efforts and activities to improve knowledge, acceptance and practice (KAP) of family planning; increase in human capital development through quality education; introduction of conditional cash transfers and expenditures (for education, for example) as effective safety nets;&nbsp; encouraging productivity and access in both farm and non-farm occupations; designing policies to promote long-term employment; geographic targeted programs (especially in the Northwest and rural areas); multi-dimensional empowerment of the poor; and an effective broad policy framework that will increase opportunities, enhance capabilities, promote security, and engender empowerment and participation.Read more
Working Paper 148 - Role of Fiscal Policy in Tackling the HIV/AIDS Epidemic in Southern Africa
14/05/2012 14:19
Working Paper 148 - Role of Fiscal Policy in Tackling the HIV/AIDS Epidemic in Southern Africa
This paper investigates the impact of&nbsp; fiscal policy on reducing the HIV/AIDS&nbsp; incidence rates in&nbsp; Southern Africa. In particular, it studies the welfare impact of different taxation and debt paths in these countries in reducing the HIV/AIDS prevalence rates. Our results show that, acting&nbsp; optimally has not&nbsp; only positive societal welfare effect but also positive fiscal effects. There is evidence from that region that antiretroviral therapy (ART) dramatically slows down the progression of HIV infection and AIDS by sharply depressing viral load, improving the cluster of differentiation (CD4) cell counts, and delaying clinical progression to AIDS and fatal complications. However, financing these ART programs is very challenging. The question then is: if these countries use public revenues to fund the intervention against HIV/AIDS, will there not be increase in their debt burden or some negative externalities on other public funded programs? We use a calibrated model, an extension of Robalino et al (2002), in order to capture the fiscal implications of government interventions against HIV/AIDS epidemics. Capital stock level as well as labor force are assumed to be optimally chosen by a unique representative firm. HIV/AIDS affects the economy through the labor force and labor productivity. The government raises taxes to finance its intervention against the HIV/AIDS epidemics and chooses the optimal reduction in the prevalence rate that maximizes the inter-temporal societal welfare. Data on demographic, epidemiologic and macroeconomic indicators used in this study are from the World Bank’s 2011 World Development Indicators (WDI). The main contribution of this paper is that it demonstrates the cost-effectiveness of the fiscal tool in the fight against HIV/AIDS if optimally used during the next decade. By acting optimally, Lesotho, Botswana and Swaziland could respectively alleviate their debt burden by around 1%, 5% and 13% of GDP, respectively, while maximizing simultaneously the inter-temporal societal welfare. This suggests that their governments should not be reluctant in using the fiscal tool to fight HIV/AIDS due to fear of an increase in public debt. One of the most important implications of our results therefore is that African countries can make much better use of their own resources to fund development projects, by increasing tax revenues. This doesn’t necessarily mean increasing tax rates, but making the tax collection system more efficient, improving general tax administration and extending the tax base. Second, optimal intervention leads to early sharp reductions in the prevalence rate, stressing the urgency of increasing expenditures on the expensive but cost-effective ART programs. Traditional fight against AIDS includes mother to child transmission prevention, condom distribution, information campaigns and counseling. But implementing these “cheap” interventions without the ART interventions is fiscally worse than the no-intervention and less macro-economically efficient than the full ART intervention case. Again, the global health agenda in the coming decade will also be about sustainable delivery of the high-impact interventions that were previously supported by development partners. It is worth noting that we have been pessimistic about intervention costs and that our approach to measuring societal welfare omits some important negative consequences of HIV/AIDS for Southern Africa such as increases in the number of orphans and human suffering of the infected. Thus estimates of welfare gains from HIV/AIDS reductions in our paper are likely to be underestimated, underscoring further the importance of immediate and optimal government interventions.Read more
Working Paper 145 - Assessing the Returns to Education in the Gambia
16/02/2012 15:41
Working Paper 145 - Assessing the Returns to Education in the Gambia
The importance of education in development is a perennial topic in economics especially in the context of sub-Saharan Africa’s development experience. The connection is not surprising since the region stands out both in its low level of schooling and its low average rate of economic growth. In the macroeconomic growth literature, evidence shows that education is positively associated with economic growth, a result that accords well with many previous studies. Micro-level research on private rates of returns to education has shown disparate estimates in sub-Saharan Africa in the private benefits to education.&nbsp; Our work focuses on private returns to education in The Gambia, a small country in West Africa with very low levels of schooling. Like other countries in the region, it also has achieved little economic growth since independence in 1965. It is therefore not surprising that the country is not on schedule to achieve one of the Millennium Development Goals: universal primary education by 2015. This work adds to the large literature that provides a range of estimates on the private rate of returns to education in Africa. What has been found to date is that there is a great deal of heterogeneity in estimates of returns to education in Africa. It could be the case that there are indeed very large differences between countries in the rates of returns to education since there has been very little replication of estimates within a single country. However, part of the difference in estimates may also be due to the use of improved econometric techniques among recent papers. Some of these new approaches have addressed issues such as ability bias and selection - problems that were not always addressed in many earlier papers. &nbsp; Another possibility is that differences in estimation strategies can also produce different results since the estimates may be specific to only a subset of the population in a given country.&nbsp; Specifically, the estimates from using an instrumental variable approach may not be comparable across different studies that employ different instruments since such an estimation strategy produces the local average treatment effects.&nbsp; Typical estimates using instrumental variables, in which the most common instrument measures access to schooling, provide measures of the returns to schooling for those who would have continued in school but did not have access to schooling.&nbsp; Given that in the African context there is great variation across countries, ethnic groups, religions, and the proclivity of parents to send their children to school even when it is available and affordable, one should also expect great variation in estimates of returns based on that population. This work contributes to the literature by providing the first estimates of the private rate of returns to education for The Gambia and among its regions. Our estimates rely on the exploitation of the exogenous variations in the availability of schools across the country at the district level and its interaction with year of birth of individuals to control for ability bias. In addition, we use exogenous rainfall shocks to control for selection bias. Like many instrument variables, ours are not perfect. We discuss the possible violation of the exclusion restriction and provide further robustness checks to mitigate them. Our study uses three nationally representative household surveys from 1992, 1998 and 2003 that provide a very high coverage rate for the overall population of The Gambia.&nbsp; The results show high and significant private rate of returns to education for individuals in the wage sector. We estimate private rate of returns to education of 23% overall, using instrumental variable estimation. In addition, we found that returns were higher for men and urban residents. The results also demonstrate large significant differences in the rate of returns to education across regions, with poorer regions registering higher rate of returns. It is worth stressing that all sub-regions and sub-groups experience high rate of returns to education. What these finding suggests is that barriers to schooling in terms of both direct and indirect costs are substantial in The Gambia. Therefore, government policies should be geared towards lowering the cost of education in the country.Read more
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