2013

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Working Paper 185 - Remittances and the Voter Turnout in Sub-Saharan Africa: Evidence from Macro and Micro Level Data
23/12/2013 09:38
Working Paper 185 - Remittances and the Voter Turnout in Sub-Saharan Africa: Evidence from Macro and Micro Level Data
For many developing countries including in Sub-Saharan Africa, international remittance flows represent a large and stable source of external finance. Recent empirical studies using Sub-Saharan African data have demonstrated the positive contribution of remittances to poverty reduction and financial development. However, a recent wave of the remittance literature shows that remittance flows can have a damaging effect as they impede external competitiveness of receiving countries by fueling inflation and appreciating the real exchange rate. They are also related to more corruption, lower labor force participation, and lower supply of public goods in education and health. The present study takes advantage of this recent literature and investigates the effects of remittances on political participation in Sub-Saharan Africa. Recent studies document the role of international migration in the propagation of political values including voting behavior. For example, international migration can shape the voting behavior in the home country through two main channels. (1) The transfer of political norms from the hosting country to the home country. (2) The direct influence through vote guidance during election time. Empirical investigations are carried out using two samples. First, the analysis is performed using cross-country macro data for 27 Sub-Saharan African countries for which it’s possible to mobilize both voter turnout and annual data on remittances. Econometric specifications controlling for key determinants of voter turnout, country fixed-effects, do not reject the hypothesis that remittances inflows are significantly associated with lower voter turnout in Sub-Saharan Africa. Second, a microeconometric approach is employed using AfroBarometer data. To deal with the non-random nature of remittances in the sample, the paper follows the recent contribution of Esquivel and Huerta- Pineda (2007) and Cox-Edwards and Rodriguez-Oreggia (2009) and resort to propensity score matching techniques to identify the effect of remittances on individuals’ propensity to vote. Using both cross-country and individual country level data, the paper demonstrates that remittance inflows significantly lower the propensity to vote during national elections in Sub-Saharan Africa. This effect is robust to empirical specifications aimed at dealing with the endogeneity of remittance inflows at both country and household level data. The findings of this paper provide evidence that one “bad news” related to remittances implies a drop in electoral participation by remittance-receiving individuals. Remittances the accountability of governments and the benefits to be had from democratic systems by reducing the interest of individuals to participate in political systems by exercising voting rights.Lire la suite
Working Paper 183 - Global Economic Spillovers to Africa- A GVAR Approach
23/09/2013 16:05
Working Paper 183 - Global Economic Spillovers to Africa- A GVAR Approach
In this paper, we develop a global vector autoregressive (GVAR) model, with 46 African and 30 foreign countries covering 90% of the world GDP, to examine the growth spillovers coming from the Euro zone and BRICs. To our knowledge, this is the first attempt to include almost all African countries (46 out of 54 for which major macroeconomic data is available) in a GVAR framework. The GVAR modeling approach, advanced by Pesaran et al (2004) and Dees et al (2007), has become an important empirical tool to understand growth spillovers. The GVAR model is a multivariate and multi-country framework used to investigate cross-country interdependency. It is also capable of generating forecasts for a set of macroeconomic factors for a set of countries to which they have exposure risks. Africa is increasingly interconnected with the rest of the world through trade and financial linkages. Africa's real export value has quadrupled between 2000 to 2010, with Europe as the main export destination followed by United States, and China. In 2012, 60% of the African countries have export GDP ratio of 30% or more while 80% of them have export GDP ratio of more than 20%. Moreover, Africa's financial linkage through private capital flows, FDI, remittances, and ODA has also increased significantly during the last decade. External financial flows hit a record high in 2012 and expected to surpass the US$ 200 billion mark in 2013. The flow of foreign direct investment (FDI), portfolio investment, official development assistance (ODA) and remittances have quadrupled since 2001. The growing economic linkage raises the important issues of growth spillover. Historically, Africa's growth pattern is highly linked with the global economic growth. The recent financial crisis has demonstrated the strength of the inter-linkage. In 2009, average economic growth was slashed from an average of about 6% in 2006-08 to 2.5% in 2009 with per capita GDP growth coming to a near standstill (AEO, 2010), following the global economic slowdown. Some estimates show that for every percentage point decline in the world real GDP growth, the sub-Saharan African economies would be contracted by 0.4 to 0.5 percentage points. As the world economy is still struggling to recover where the global growth prospects are far from stellar, it is important to revisit the global growth spillover effect on Africa. The results based on the GVAR generalized impulse response functions show that shocks in the Euro zone and BRIC countries could have significant effects on the African economies. In terms of the order of magnitude, the effect of a percentage decline in Euro zone growth is twice of that of an equivalent decline in BRIC's growth. The effects of both the Euro and BRICs shocks vary significantly from country to country depending on the nature of the economies. While oil exporting countries are deeply affected by the Euro zone growth shocks, the BRICs shock affects fragile states more than the rest of the African economies. The investment driven countries (emerging African countries) are, however, affected by a lower magnitude. This underscores the importance of economic diversification in terms of weathering adverse shocks. The adverse global growth spillover has important macroeconomic implications. Our results indicate that the global slowdown could lead to a decline in inflation rate and depreciation of nominal exchange rate following the contraction of the domestic economy and fall in exports earnings, respectively. The decline in inflation rate is however a short-lived one. Inflation rate would rise up as the depreciating exchange rate passes through prices over the medium term. Inflationary effects would be felt in most of the African economies within a period of one year. A policy response to tame inflation may further contract the economies. The paper also looked at the impact of G4 countries' (US, EU, Japan and the United Kingdom) quantitative easing (QE) on African economies. The QE seems to have a mild inflationary effect and could lead to appreciation of nominal exchange rate although the magnitudes are limited. Our results indicate that the investment driven African countries, which are better integrated with the global market, are more exposed to the undesirable effects of the QE program than the rest of the African economies.Lire la suite
Working Paper 182 - Rising Food Prices and Household Welfare in Ethiopia: Evidence from Micro Data
23/09/2013 09:56
Working Paper 182 - Rising Food Prices and Household Welfare in Ethiopia: Evidence from Micro Data
The Ethiopian economy has witnessed double-digit rate of inflation since 2003, surging to a peak of 53% in June 2008. The significant rise in the relative prices of grain and other foodstuff such as sugar, edible oil and other necessities were particularly worrisome. Large changes in both absolute and relative prices in such a short period of time can undermine the rebound in per capita incomes in the last decade and the poverty reduction effort of the government. Cognizant of the gravity of problem, policymakers have mounted efforts to cushion vulnerable households from experiencing the full brunt of price surges. The scope for such interventions will be once the welfare effects of rising prices are understood. Moreover, better measures of key parameters driving the demand for grain and other goods supplements an analysis into the causes of relative price changes in Ethiopia.   This paper seeks to bridge the knowledge gap surrounding the link between welfare and rising prices. First, the study examines the distributional consequence of the rise in absolute price over the recent periods in rural as well as urban areas. It provides quantitative estimates of the change in the measure of income inequality due to price changes. Such findings will indicate whether or not the poor have been affected disproportionately more than others during inflationary periods. Second, it provides evidence on the welfare implications of changes in relative prices of key consumption goods by constructing concentration curves using non-parametric methods. The pair-wise comparison of concentration curves is used to analyze whether subsidies on wheat or other grain products could raise welfare, particularly, if it is financed through surtax imposed on other commodities, or income. Third, it estimates the effect of changes in the relative prices of agricultural goods on consumption growth for rural as well as urban households to capture welfare effects of the price shocks. Finally, a range of income and cross-price elasticity of demand values are reported to understand better the role of demand shifts in driving relative price changes. The results show that the recent dramatic rise in the general price level may be responsible for a 2% annual rise in the average GINI coefficient in urban areas. Therefore, between 2000 and 2006, the GINI coefficient rose by about 6 percentage points due to inflation alone suggesting the anti-poor bias of the inflationary process in urban areas. Secondly, consumption pattern for cereals and other food items suggest that subsidies targeted at maize in rural areas, and teff in urban areas financed say through a proportional income tax (surtax) could be welfare enhancing, particularly for the poor population. The study shows that, while real consumption growth deteriorated significantly following the rise in the real price of food (cereals) in urban areas, its effect on rural households depended on the potential to be a net-seller or a net-buyer. As a result, land rich households tended to benefit significantly from real and nominal price movements of cereals while land poor households lose enormously. Thus, policy reforms designed to raise agricultural terms of trade in favour of the rural sector need to address the potential for general price hikes to aggravate poverty by impoverishing the land-poor and consequently raising income inequality as well as pushing the average farm household into poverty. The study estimates that the overall effect of the recent hike in relative prices has increased the true cost of living by 12% in urban areas, suggesting the severity of the welfare loss associated with inflation. In addition, if unchecked, inflation in urban Ethiopia could worsen income inequality significantly. It is estimated that between 2000 and 2006, the Gini coefficient might have increased by 6.1% due to changes in relative prices that were adverse to the urban poor. This result coupled with the recent trend of rising inequality in urban areas suggests that gains in average per-capita growth can be eroded easily leading to growing impoverishment of households in urban areas. The impact of a rise in the real prices of cereals on the welfare of rural households is more complex. To partially address this issue, the study specified a dynamic model of consumption growth, which is a function of changes in household endowments and price shocks. The model was estimated for three distinct groups which potentially could address the net-purchasing position of a household. These groups are: land-rich, land-poor and a typical farm household. The result show that real growth in consumption is positive for land-rich households, negative for a typical farm household, and deteriorates significantly for land-poor households. These outcomes imply negative consequence for the pace of poverty reduction in rural areas.Lire la suite
Working Paper 181 - Determining the Correlates of Poverty for Inclusive Growth in Africa
23/09/2013 09:56
Working Paper 181 - Determining the Correlates of Poverty for Inclusive Growth in Africa
From 2000 to 2012, Africa’s economy has grown rapidly and remarkably, averaging over 5 percent. In 2012 GDP growth in Africa was 6.6 percent, even at a time developed nations are experiencing growth contraction. In spite of the high growth that Africa has experienced in recent years, poverty, inequality and unemployment remain high, indicating lack of inclusion in the development process and its outcomes. But poverty, for example, can be reduced at a faster rate when inclusive growth strategies are applied and when special income distribution policies are undertaken. The study is therefore an attempt to contribute to the design of inclusive growth policies. It examines the correlates of poverty - headcount index of international poverty line at US$1.25 per day - using data on 43 African countries for the period, 1980 to 2011. This study 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 Africa and promote inclusive growth. Using the basic growth–poverty model, the paper examines the correlates of poverty, using data on Africa for the period, 1980 to 2011. The unbalanced cross-section time series data covers 43 countries and comprises a sample size of 147 data points. For robustness and to account for endogeneity issues, our estimations are done with OLS, FGLS, IV-2SLS and IV-GMM. The log transformation of all the variables allows us to interpret the coefficients as elasticities. Our empirical estimates suggest that higher levels of income inequality, primary education alone, mineral rents, inflation, and higher level of population tend to increase poverty in Africa and therefore bad for poverty reduction and inclusive growth in the continent. On the other hand, higher real per capita GDP, net ODA, and secondary education have significant negative effect on poverty in Africa and thus good for poverty reduction and inclusive growth in the continent. Trade openness has positive but insignificant effect on poverty in Africa in spite of the huge liberalization efforts of African countries. First, given the finding that inequality fuels poverty in African countries, we recommend in particular, conditional cash transfers based on community approaches and targeted. Second, the significant positive effect of net ODA on poverty in Africa demonstrates a positive “infrastructure effect” by which foreign aid improves the recipient country’s economic and social infrastructure and hence raises the marginal product of capital in the country. Thus, in spite of the debt crisis in the Euro Area, allowance should still be made for aid as an important vehicle for poverty reduction in Africa. Third, African countries must increase their national incomes by deepening macroeconomic and structural reforms to increase their competitiveness, dismantle existing structural bottlenecks to private and public investment, scale-up investments in hard and soft infrastructure, and increase productivity, especially in agriculture, etc. Fourth, effective inclusive growth policies that invest in human capital of the citizens and workforce are needed, including up-skilling, emphasis on technical and vocational education and training (TVET), and educational reforms that conform to industry needs. Fifth, following our finding that mineral rents exacerbate poverty in Africa, international financial institutions like the African Development Bank have a critical role to play in helping these countries acquire the much-needed capacity not only to negotiate beneficial contracts and earn higher rents but also for effective management of mineral rents and other related revenues, using a new natural resources management framework. Sixth, central banks should continue with tight monetary policies, supported by prudent fiscal management and tackling binding structural constraints. Seventh, trade openness has insignificant effect in reducing poverty in Africa. This calls for improved competitiveness, value-addition, diversification, and increased intra-regional trade. Lastly, given that poverty increases with the number of household members (or family size), there is urgent need to intensify family planning services efforts and activities in African countries so as to improve knowledge, acceptance and practice (KAP) of family planning.Lire la suite
Working Paper 180 - Marital Status, Household Size and Poverty in Nigeria: Evidence from the 2009-2010 Survey Data
23/09/2013 09:56
Working Paper 180 - Marital Status, Household Size and Poverty in Nigeria: Evidence from the 2009-2010 Survey Data
Recent studies on a sample of sub-Saharan Africa have shown that only half of widows or their children received property after the death of their husbands. The rates were high in Rwanda66% in Rwanda (60 percent), Namibia (57 percent), and Tanzania (53 percent). Indeed, only women in polygamous marriages were less likely to report inheriting property. These studies support the view that property inheritance by widows is significantly and robustly associated with higher welfare outcomes (per capita consumption and value of household stocks) in most regions. This paper examines the effect of marital status and household size, among other correlates, on poverty in Nigeria a view to addressing the related question of whether and how poverty can be sustainably reduced, using the Harmonized Nigeria Living Standard Survey (HNLSS) data of 2009/2010. The study applies multivariate analysis, using a logistic regression in accordance with the basic principles of discrete choice models on the 2009/2010 data. In order to explore the correlates of poverty with the variables thought to be important in explaining poverty a logistic regression relating poverty status (the dichotomous variable) to marital status; demographic characteristic (household size), personal characteristic (age and its square); gender; educational attainment; occupation/employment; and geographical residence. Our results show that monogamous marriage, divorce/separation and widowhood are negatively and significantly correlated with the probability of being poor. However, monogamous marriage has the largest probability of reducing poverty in Nigeria. We also find that household size matters in determining poverty in the country: a one-person household negatively and significantly reduces poverty while addition of members to the household, progressively increases the probability of being poor. In addition, our results show that there is a significant concave (inverted-U shaped) relationship between age and poverty. Other variables found to significantly reduce the probability of being poor include: being a male, completion of post-secondary education, being in paid household employment, and residence in the North Central and South East geopolitical zones. Variables that increase the probability of being poor in Nigeria include rural residence, possessing no education, being a self-employed farmer, and residence in the North West geopolitical zone of the country. Based on the results, we recommend a number of policy interventions necessary to reduce poverty in Nigeria. The study provides a set of policy interventions necessary to reduce poverty in Nigeria. First, while government cannot legislate marriage structure given the heterogenous nature of the country and the need to promote freedom of choice, public and private sector policies can be used to increase the number and proportion of high quality monogamous marriage rates among Nigerians.   Second, given that property inheritance helps widows and divorced women to reduce poverty, the government, at the national level, should embark on policy reforms to guarantee women’s rights to equal inheritance under the law, and to increase women’s legal literacy so that they are able to claim what is rightfully theirs. Such policies should also support women’s ownership claims to property in the event of divorce. Third, given that poverty increases with the number of household members (or family size), there is urgent need to intensify family planning services efforts and activities in Nigeria so as to improve knowledge, acceptance and practice (KAP) of family planning. This will involve not only increased financial outlay but also research on fertility determinants as well as decentralized planning, delivery and supervision of family planning services. Fourth, there is a need to focus on gender-based poverty interventions, especially among female-headed households in Nigeria. Improving access to education, for example, can reduce gendered disadvantages both by increasing individual productivity and by facilitating the movement of poor people from low-paying jobs in agriculture to higher-paying jobs in industry and services. Making agriculture attractive with modern inputs and easy access to credit, which will help to increase productivity in the sector, will also be helpful.Lire la suite
Document de travail 179 - Hétérogénéité des effets de l’aide sur La Croissance Economique En Afrique Subsaharienne : évidences comparatives entre pays stables et pays en post conflit
01/01/1970 00:00
Document de travail 179 - Hétérogénéité des effets de l’aide sur La Croissance Economique En Afrique Subsaharienne : évidences comparatives entre pays stables et pays en post conflit
L’Afrique subsaharienne est la première région du monde bénéficiaire de l’afflux de l’aide extérieure. La communauté internationale a consacré plus de 568 milliards de dollars américains d’aide étrangère au développement de l’Afrique subsaharienne (ASS) depuis 1960, soit environ 15% du PNB du continent, c'est-à-dire en proportion, quatre fois plus que le plan Marshall qui a permis le redécollage des économies européennes après la deuxième guerre mondiale(Commission Economique pour l’Afrique, 2010). Cependant,  la croissance en Afrique Subsaharienne n’a pas suivi la tendance de l’afflux de l’Aide Publique au Développement (APD). Elle est restée faible malgré un regain de l’activité économique au début des années 2000 (soit  en moyenne 2,37%). Ainsi, l’objectif de cette étude est de mettre en évidence les effets de l’APD sur la croissance et de déterminer les canaux de transmission en Afrique subsaharienne.  Par ailleurs l’étude fait une différence entre les pays stables et les pays en situation de post conflit. L’analyse effectuée sur un échantillon de 34 pays d’Afrique sub-saharienne sur la période 1990-2010 donne lieu à trois résultats majeurs. (1) l’aide a un effet positif sur la croissance uniquement lorsque l’estimation est contrôlée du niveau de la gouvernance. (2) La dynamique comparative quant à elle montre que la gouvernance et l’éducation sont les principaux canaux de transmission de l’aide à la croissance en environnement stable. En revanche, en environnement de post conflit, l’aide affecte la croissance via l’investissement en capital public (infrastructure).  (3), l’approche de décomposition d’Oaxaca-Blinder montre que l’écart en termes de montants d’aide reçus n’explique pas les différences de croissance observées entre pays stables et pays en situation de post conflit. Sur la base de ces résultats, une recommandation de politique économique pourrait être d’orienter l’aide allouée respectivement au financement de l’éducation et à l’amélioration de la gouvernance dans les pays stables. Dans les pays en situation de post conflit, il faudrait par contre insister sur le financement des infrastructures.Lire la suite
Working Paper 175 - Youth Employment in Africa: New Evidence and Policies from Swaziland
18/06/2013 09:03
Working Paper 175 - Youth Employment in Africa: New Evidence and Policies from Swaziland
The main objective of this paper is to document the labor market disadvantages faced by Swazi youth, to analyze changes in these disadvantages over time and to discuss options for addressing them. Swaziland indeed faces a major youth employment challenge. Recent labor force surveys in Swaziland revealed that the country has one of the highest unemployment rates among Africa’s middle income countries, which stood at 26.3 and 26.8 percent of the labor force, in 2007 and 2010 respectively. The surveys also revealed that marked differences across subgroups have emerged, with youth, women, and less educated workers being disproportionally impacted. The labor market situation has worsened in 2011 and 2012 because of the delayed impact of the global financial crisis, which was transmitted to the economy mostly through the collapse of revenues from the Southern Africa Custom Union (SACU). The paper contributes to the literature on labor markets in Southern Africa by providing the first systematic evidence on the youth labor market in Swaziland, a country with a particularly high youth unemployment rate. Besides Southern Africa, the paper contributes to the ongoing more general analysis and policy debates on youth employment in Africa. First, reliable labor market data from African countries are still relatively scarce, and until recently, none was available for Swaziland. Second, with the global financial crisis turning into a job crisis and impacting youth disproportionally, youth employment became a key global policy issue. In Africa, where youth employment is a long-standing challenge, policymakers have put even higher priority on creating jobs for their youth and on entrepreneurship. The paper adds to these debates and provides insights from a small land-locked country with one of the highest youth unemployment rate in Africa and globally. The paper sheds light on the trends, scale, and forms of youth labor market disadvantages, by utilizing the first two (2007 and 2010) Swaziland Labor Force Surveys, which provide a sample of over 3,000 households and more than 13,000 individuals. Using statistical analysis, the paper first outlines the main features of the Swazi labor market based on the country’s Labor Force Surveys 2007 and 2010. It then discusses both supply-side (e.g., demographic, social) and demand-side (e.g., private sector growth) drivers of youth unemployment, and illustrates the first-round impact of the global financial crisis on Swaziland's labor market. The paper also utilizes a multinomial logit model to examine some of the key socio-economic factors (e.g., age, gender, education) that contribute to the high youth unemployment. The outcome categorical variable indicates whether the individual has a wage employment in the public sector, the formal private sector, the informal private sector, or is self-employed, inactive or unemployed. The vector of controls includes demographic characteristics (such as gender and age), household-related characteristics (such as the marital status and the individual’s responsibility in the household), proxies of mobility (such as the geographical location - urban versus rural- and the length of stay in the area), and education variables. The model focus on young adults (ages 20 – 29) since tertiary education and self-employment are relatively rare among teenagers (ages 15 – 19). The findings from the statistical analysis indicate that the youth labor market in Swaziland is characterized by a high overall unemployment with long duration, a declining employment and labor force participation rates. It also indicates that unemployment is especially widespread among women, less educated, and youth. The analysis also revealed that the labor market disadvantages faced by Swazi youth relate to the lack of jobs, discouragement or the lower quality jobs. The findings from the multivariate analysis indicate how socio-economic factors (e.g., education, age, gender, location and mobility) drive youth labor outcomes. The results show in particular that higher education, living in urban areas and being mobile increase employment chances of young people. Among young adults, women and very young people have lower probability of employment in the private sector relative to being unemployed, reiterating the need to pay special attention to these groups. Some of the key policy messages for fostering dynamic youth entrepreneurship – in Swaziland and other middle income countries in Southern Africa – that emerge from the paper emphasize that an enabling business environment is needed along with the government’s pro-active support for entrepreneurial training and start-up capital. Regarding the latter, the Swaziland’s experience underscores the importance of careful selection of projects for funding, and of monitoring the use of funds after disbursement. International good practices suggest that government interventions should target the most viable projects, extend greater financial support to a fewer high-potential entrepreneurs rather than spread resources thinly, and provide complementary packages of services instead of a single measure.Lire la suite
Working Paper 171 - Youth Unemployment and Political Instability in Selected Developing Countries
14/06/2013 11:13
Working Paper 171 - Youth Unemployment and Political Instability in Selected Developing Countries
Across the globe, the recent financial and economic crisis has led to soaring youth unemployment. In Africa for instance, youth unemployment is exacerbated by the additional challenges of a youth population which is considerably higher than other regions, narrow national labour markets and persistently high levels of poverty. More recently, the North Africa region, which has the world’s highest youth unemployment rates and where one in four young people is reported as jobless, experienced violent social uprisings in which young people played a critical role. Numerous studies suggested that large rate of youth unemployment destabilizes countries  thus making them more susceptible to armed conflict (Urdal, 2006, 2012). This is broadly consistent with an increasing body of literature on the causes of political instability and conflicts, such as Collier and Hoeffler (2002) or Miguel et al (2004) to name a few. Taking advantage of this literature, this paper investigates the effect of youth unemployment on the political instability in selected developing countries. Using data from 1980 to 2010 from 24 developing countries in five regions (Africa, Latin America, the Middle East and Southeast Asia), this paper shows that political instability occurs particularly in countries where youth unemployment, as well as social inequalities and corruption are high. The results suggest that youth unemployment rate is positively and significantly associated with the measure of political instability. Specifically, doubling the unemployment rate induces an increase of the risk of political instability with a magnitude ranging between 1.06% and 1.4% depending ono the specification. These results add to a broad literature that stresses the importance of economic conditions as the most critical factors guaranteeing political stability in developing countries. This paper has a clear policy implication. In order to avoid instability and violence, focus should be on monitoring economic opportunities for young people, and particularly on providing employment or educational opportunities for youth in periods of economic decline. Creating viable jobs for young people is a precondition for sustainable development and peace in all countries; and particularly in countries which have already experienced violent conflict. However, we do recognize that political instability is a more complex phenomenon which may owe also to geo-political factors which have not been taken into account in this paper.Lire la suite
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