2015 ASSA Annual Meeting

Our Annual Meeting was a great success. Please see below for post event information, including presentation downloads.

Saturday, January 03, 2015

SPECIAL EVENT: General Meeting and Presidential Address – Invitation Only

African Finance and Economic Association (AFEA)

SPECIAL EVENT: Luncheon – Invitation Only

African Development Bank/African Finance and Economic Association (AFEA)
Speaker: Mr. Charles Boamah, Vice President, Finance, African Development Bank.

Trade and Africa’s Structural Transformation (O1, F1)

African Finance & Economics Association
Presiding: LEONCE NDIKUMANA (University of Massachusetts-Amherst)

Can Export Promotion Agencies Stem the Deindustrialization in Sub-Saharan Africa?

MALOKELE NANIVAZO (UN-WIDER)
ISAAC MARCELIN (University of Maryland-Eastern Shore)

View Paper 1 Abstract (click to show/hide)

We investigate how Export Promotion Agencies (EPAs) affect manufacturing outcomes in Sub-Saharan Africa using difference-in-differences methodology. Results indicate that three and seven years following EPA’s adoption, industry value added to GDP ratio increased by 3.24% and 14.64%, respectively. The joint effects of EPAs and Export Processing Zones (EPZs) are a reduction in customs and trade regulations. EPA countries’ manufacturing firms post lower level of collaterals for bank loans. Private credit is significantly higher in EPA countries. EPA facilitated credit enables industrial firms’ access to trade credit and working capital financing. Results are confirmed by placebo and average treatment effects tests.

Is Regional Integration Harmful or Beneficial For Agricultural Productivity?: The Case of ECOWAS

JULIET ELU (Morehouse College)
GREGORY PRICE (Langston University)

View Paper 2 Abstract (click to show/hide)

In this paper we consider whether regional integration is harmful or beneficial agricultural productivity in Sub-Saharan Africa. We examine the case of countries who are members of the Economic Community of West African States (ECOWAS). Even though ECOWAS was created in 1975 to promote cooperation and improve the standard of living for member countries, the process of sub-regional integration in Sub-Saharan African and other parts of the world has also been a source of external shocks for output. We estimate the parameters of a simple model of agricultural productivity with panel data to identify the effects of ECOWAS on agricultural productivity. Our results will inform the extent to which regionalization can be a policy intervention that can raise agricultural productivity in Sub-Saharan Africa particularly ECOWAS.

What Can Trade Tell Us about Economic Transformation? Composition of Trade and Structural Transformation in African Countries

MINA BALIAMOUNE-LUTZ (University of North Florida)
ABDOUL MIJIYAWA (World Bank)

View Paper 3 Abstract (click to show/hide)

In its inaugural flagship report, the 2014 African Transformation Report, the African Center for Economic Transformation (ACET) argues that while the recent high economic growth in Africa is welcome, it will not by itself sustain development on the continent and that in order to ensure that growth is sustainable and continues to improve the lives of most people, African countries need to vigorously promote economic transformation. Page (2012) also notes that Africa must industrialize otherwise the continent cannot sustain high growth rates that it experienced recently. Hausmann et al. (2007), Hidalgo (2009), and Hidalgo and Hausmann (2009), among others, have emphasized the importance of structural transformation in economic growth and development. These authors argue that different products have different consequences for development. In this paper, we use 1990-2010 disaggregated import and export data for 21 African countries that were studied in ACET’s recent work on economic transformation in Africa and develop a new trade intensity index (TII) which is then used in empirical estimations to investigate the role of trade in specific subsectors in explaining structural transformation. More specifically, we use the TII as our variable of primary focus to shed light on these two questions: (1) Can the type (capital goods versus other goods) of major imports predict structural transformation? (2) Can the type of exports (manufacturing or services versus primary commodities) predict structural transformation? Our indicator of structural transformation is ACET’s African Transformation Index (see the 2014 African Transformation Report). We perform IV and Arellano-Bond dynamic panel GMM estimations and, in addition to TII on the right-hand-side, we control for a number of relevant variables, including institutional quality, natural resource dependence, ethnic tensions, regime change, human capital, openness to trade, financial development, inward foreign direct investment, and per-capita income. The empirical results suggest that the composition of imports matters more than the composition of exports for explaining structural transformation in natural-resource-dependent countries, while the composition of exports matters more in the case of countries that are relatively natural-resource scarce. In addition, the impact of trade is found to be influenced by institutional quality and income. We discuss the lessons we can learn from the role trade and trade policies, as well as the institutional arrangements influencing them, in shaping the pathways to economic transformation in Africa. In particular, we contrast trade and institutional arrangement patterns in two SSA countries (Mauritius and South Africa) that have high scores on ACET’s African Transformation Index to the patterns in a group of SSA countries that have very low ATI scores. Our study aims to complement the literature by providing further evidence on the drivers of structural transformation in the African context. More specifically, our paper will make three main contributions. First, it will be the first to utilize two new indicators, the African Transformation Index (developed by ACET) and a new trade intensity index to investigate the drivers of structural transformation in Africa. Second, our paper is a cross-sectional analysis, which allows identifying the drivers of structural transformation in the average African country. In other words, our study allows identifying factors that on average, contribute to structural transformation in Africa. Third, in addition to our variables of interest, our approach allows controlling for the effects of other factors, including policy-related factors on structural transformation in Africa. Indeed, beside trade-related variables –i.e., composition of exports and imports- which are our variables of interest, we also control for the effects of policy and institutional variables that have the potential to contribute to structural transformation in Africa.

Some Determinants of Inter-Country Variations in the Growth Performance of African Countries

STEVE ONYEIWU (Allegheny College)
MACKENSIE BLUEDORN (Allegheny College)

View Paper 4 Abstract (click to show/hide)

African countries have achieved impressive growth rates within the past decade. Amid this performance, however, are inter-country variations in the region’s economic growth, with some countries still grappling with lackluster growth rates. How might Africa’s growth performance be explained, and why are some countries still lagging behind? This paper uses fixed effects panel regressions, embedded within an endogenous growth model, to explore some of the determinants of growth in Africa. Using a panel dataset from 31 Sub-Saharan African countries covering the period 2000-2012, the paper investigates the role of innovation and institutional factors in Africa’s economic growth. Results from the empirical analysis suggest that institutional factors are just as important for growth in Africa as stylized factors such as physical capital and openness of the economy. Specifically, the paper confirms the notion that political stability is important for economic growth in the region. The empirical analysis also reveals that the ability to absorb technological knowledge is more important for economic growth in Africa than the ability to innovate.

Does Gender Diversity Support the Bottom-Line in Microfinance Firms in Africa?

DARLINE AUGUSTINE (Rochester Institute of Technology)
CHRISTOPHER O. WHEAT (Rutgers University)
DANIELLE T. SMITH (Rochester Institute of Technology)
CHARLES A. MALGWI (Bentley University)

View Paper 5 Abstract (click to show/hide)

This study examines the effects of workforce (gender) diversity on organizational performance in microfinance firms in Africa as compared to the rest of the world. We use two measures for organizational performance: return on assets (ROA) captures financial performance or profitability; and operating expenses (OpEx) measures the levels of operating expenses. We describe comparatively low levels of operating expenses as operating efficiency. We measure gender diversity at two levels of the organization. The presence of female Board of Directors is used to capture gender diversity at the decision-making level of the firm; while the presence of loan officers capture gender diversity at the operational level. We find that the presence of female Board Directors positively correlated with profitability, while higher levels of female loan officers reduces operating expenses. These results indicate that gender diversity enhances organizational performance. We also find that gender diversity is particularly important for new or young firms within the microfinance industry. At a crude level, these findings suggest that policy makers will want to consider workforce diversity in microfinance firms as they aim to develop and build capacity in microfinance firms.

Towards Economic Growth and Development in Sub-Saharan Africa: Does That Mar the Environment?

SOLOMON ABOAGYE (University of Ghana)
PAUL ADJEI KWAKWA (Presbyterian University College Ghana)

View Paper 6 Abstract (click to show/hide)

The growth and development of a nation have been found to be determined by a number of factors. Meanwhile, ensuring environmental sustainability amidst the quest to stimulate growth and development in SSA remains an issue of great concern. Recent reports and statistics indicate that some aspects industrialization, urbanization, trade etc activities in Sub Saharan Africa have had immense adverse environmental implications. Yet, there is virtually no substantial study that has examined the environmental impact of these growth-enhancing policies that have adopted by countries in SSA in their quest to stimulate growth into their economies. This could be responsible for the indifference of policy-makers regarding to environmental sustainability in many countries in the region. Using a panel dataset from 1985-2010 on 36 SSA countries the study examines the environmental impact of growth and development-enhancing factors such as trade openness, Foreign Direct Investment (FDI), industrialization, urbanization. The environmental variables employed are CO2 emissions, Adjusted Net Savings (ANS) and energy intensity. Employing the system Generalized Method of Moment to explore the dynamism of the environment, it was evident that the Environmental Kuznet Hypothesis (EKH) exist for Adjusted Net Savings. Further, both trade openness and FDI were found not to harm the environment as measured by CO2 emissions and Energy intensity, but they both tend to reduce the sustainability of the environment in SSA as measured by ANS. However, industrialization was also found to unambiguously harm the environment regardless of the environmental variables in question while urbanization was revealed to increase CO2 emissions. In the light of these findings, it is recommended that policy instruments that would make industrialization friendly to the environment are very essential and imperative because industrial activities so far appeared to have harmed the environment in SSA. Also, governments should be committed to developing the rural areas so that the rural folks are not compelled to move to the urban areas. Further, it is recommended that in the region’s quest to achieve higher economic growth, it is also very crucial that these destructive aspects of growth are carefully identified and specific policies are tailored to deal with them ruthlessly so as to halt their damaging effect to the environment. Furthermore, there is an urgent need for policy makers, be it environmentalists or economists, to come out with pragmatic and clearly defined policies to halt and probably reverse the negative impact of trade and FDI on the sustainability of the environment.

Discussants:

DANIELLE T. SMITH (Rochester Institute of Technology)
OLUYEMISI KUKU-SHITTU (NSSP-IFPRI)
INOUSSA BOUBACAR (Clarion University)
SAMUEL AMPONSAH (Tokyo International University)
MALOKELE NANIVAZO (UN-WIDER)

Issues in African Development I (O1)

National Economic Association
Presiding: GREGORY PRICE (Langston University)

Skills, Gender and Entrepreneurship in Africa

MINA BALIAMOUNE-LUTZ (University of North Florida)
ZUZANA BRIXIOVA (African Development Bank and IZA)
MTHULI NCUBE (African Development Bank and University of Witwatersrand)

View Paper 7 Abstract (click to show/hide)

Entrepreneurship as a component of economic growth is increasingly the subject of research by economists. This paper examines how the factors of skill and gender are related to entrepreneurial outcomes in Africa.

The Impact of Financial Services Development on Remittances: Evidence from Africa and Latin America

BICHAKA FAYISSA (Middle Tennessee State University)
CHRISTIAN NSIAH (Black Hills State University)

View Paper 8 Abstract (click to show/hide)

The short-run relationship between financial services development and remittance flows has been widely studied. There are, however, only limited number of empirical studies that consider the long-run relationship between financial services development and remittances. Using a newly developed panel fully modified OLS (PFMOLS) model, this study investigates the long-run relationship between remittances and financial services development and other control variables including exchange rate, the size of migrant stock, the domestic per capita income in the receiving country and foreign per capita income in the main host country for 44 countries from Africa and the Americas for the years between 1985 and 2010. Preliminary results suggest that the financial services development, real exchange rate, and migrant stock have positive and statistically significant effect on remittances in both regions as a group and in each of the regions. In terms of policy implications, governments in these regions may find it very productive to implement policies which promote financial services development and exchange rate stability in order to ensure the external flow of resources in the form of remittances for the expressed purpose of poverty reduction, consumption smoothing, and the profit motive of private investment.

What Drives Foreign Direct Investments into West Africa?: An Empirical Investigation

JOHN C. ANYANWU (African Development Bank)
NADEGE D. YAMEOGO (African Development Bank)

View Paper 9 Abstract (click to show/hide)

This paper analyzed the factors that drive foreign direct investments (FDI) by looking at regional heterogeneity among the five African regions. For the first time, FDI drivers are analyzed for each of the five regions of Africa contrary to previous studies which focused on Africa as a whole. The paper used a panel dataset from 1970 to 2010 of 53 African countries divided into: East, West, Central, North, and Southern Africa. OLS and GMM techniques are used for the estimations. The main results indicate that: (i) there is a negative relationship between FDI inflows and GDP per capita for all the five regions, except Central Africa. But GDP growth rate has a strongly positive effect only in Central Africa; (ii) trade openness has a positive effect on FDI inflows in all the five regions but the effect is not significant for East and Central Africa; (iii) Net foreign aid has negative effect on FDI in East, North, West, and Southern Africa; (iv) Political regime type/democracy contributes positively and significantly attracting foreign investors in West Africa and Southern Africa; (v) the level of urbanization has a strong positive effect only in East and Southern Africa but a strong negative effect in West Africa; (vi) infrastructure development has a positive impact on FDI inflows in North and East Africa; (vii) the level of education has a positive effect only in West and North Africa; and (v) oil production has a significant positive effect only in West Africa.

Market Structure and Concentration of Sectoral Credit: Evidence from the Zambia Banking Industry

ANTHONY SIMPASA (African Development Bank)
LAURELINE PLA (African Development Bank)

View Paper 10 Abstract (click to show/hide)

The financial crises of 2008-2009 resulted in changes in market structure and sectoral concentration of credit in many economies. This paper uses bank data from Zambia to explore the implications of recent changes in market structure and sectoral concentration.

Trade Finance in Africa: New Data on Usage, Trends and Constraints Faced by African Banks

OUSMAN GAJIGO (African Development Bank)
THOURAYA TRIKI (African Development Bank)

View Paper 11 Abstract (click to show/hide)

This paper presents new empirical evidence on recent changes in the use of trade finance in Africa. Of particular interest are analyses of new data and constraints faced by African banks.

Discussants:

RUTH UWAIFO OYELERE (Emory University)
ELIZABETH ASIEDU (University of Kansas)
APKAN EKPO (West African Institute for Financial and Economic Management)
ADAM B. ELHIRAIKA (United Nations Economic Commission for Africa)
JANE KARONGA (United Nations Economic Commission for Africa)

Sunday, January 04, 2015

Economic, Social and Political Development in Africa (O1, O1)

African Finance & Economics Association
Presiding: JULIET ELU (Morehouse College)

Tax Evasion and Information Technology in a Developing Country: Micro Evidence from Ethiopia

ABDULAZIZ B. SHIFA (Maxwell School, Syracuse University)
ABEBE SHIMELES (African Development Bank)
DANIEL ZERFU (African Development Bank)

View Paper 12 Abstract (click to show/hide)

Governments in developing countries are typically constrained by a limited fiscal capacity to finance the provision of public goods essential for economic activities – a constraint that has been cited as one of the fundamental challenges to economic development (Besley and Persson, 2013; Acemoglu, 2005). Hoping to improve tax monitoring with a lower cost, several developing countries have recently imple- mented electronic tax systems (ETS) to gather and process tax data. In this paper we document the impact of the adoption of the ETS using a large administrative data set on taxes paid by firms in Ethiopia. We find that: (1) firms paid a higher amount of tax right after adoption of the ETS; (2) however, this initial effect fades over time; and, (3) the adoption of the ETS is followed by increased exit rate of firms. We also find evidence that the effects are driven primarily by firms that are more likely to evade taxes prior to the ETS adoption. We present a simple version of standard models of tax evasion that provides a consistent interpretation of the empirical patterns. We conclude that, due to effects (2) and (3), the ETS experiment in Ethiopia resulted in a substantial erosion of the tax base and, counter to its intended objective, led to a reduction in total government revenue.

The Incidence of Health Shocks, Formal Health Insurance, and Informal Coping Mechanism

SAMUEL AMPONSAH (Tokyo International University)

View Paper 13 Abstract (click to show/hide)

In recent years, both theoretical and empirical research has been accumulated in development economics regarding the household behavior in response to shocks in developing countries. Especially the impact of weather-related shocks such as droughts/floods and the efficiency of informal mechanisms to cope with these shocks are explored in depth in the literature. In sharp contrast, our knowledge on the economics of health shocks in low-income developing countries is rather limited. Few studies have documented that low incomes and poor health insurance coverage account for catastrophic medical expenditures in the event of a health shock. The current study uses different Ghanaian household survey data to examine the different coping mechanisms employed by uninsured household to protect themselves from incidence of health shocks. It explores the impact of formal health insurance (the National Health Insurance Scheme) on households' out-of-pocket spending and catastrophic health expenditure.

Sustainable Investing in Capital Markets: A Strategic Approach

JOHNSON KAKEU (Morehouse College)

View Paper 14 Abstract (click to show/hide)

This paper develops an economic framework that analyzes the effects of integrating environmental sustainability issues into investment decisions in capital markets. Sustainable investors are assumed to act so as to maximize the well-being which depends not only on the consumption but also on an inclusive wealth index that accounts for changes in the environmental degradation. The sustainable asset pricing equation is shown to include an environmental risk premium that prices the negative externality related to the degradation of the environmental quality. Investors' environmental awareness affects wealth accumulation through the joint working of three forces: the portfolio effect, the saving effect and the environmental-hedging effect. The propensity to consume decreases as the expected growth rate of the environmental degradation increases. Higher rate of saving can result from both a greater investors' environmental awareness and an increased environmental degradation. The propensity to consume has mixed response to investor's environmental awareness. Policy recommendations are analyzed.

To Redistribute or Not: Land Reform and Economic Well-Being in SADC Countries

INOUSSA BOUBACAR (Clarion University)
GIBSON NENE (University of Minnesota)

View Paper 15 Abstract (click to show/hide)

Landlessness and disparity in the size of land holdings among current land owners plays a central role in determining the upward economic mobility of many households in all nations, especially in developing countries. Several reasons abound: First, disparity in the distribution of land holdings may pose significant effect on the overall economic growth and development of a country. Second, for many agricultural households, land is the single most important asset: it maintains its capital value over a long period of time; thus provides security to its current and potential owners. Without doubt, landlessness and disparity in the size of land holding distribution, where ownership exists can create and/or sustain inequality in income levels among current as well as future generations. Landlessness can also constrain individual’s access to credit markets that permits the purchase of modern farming and productivity enhancing inputs such as farm machineries, fertilizers and pesticides, and access to the often freely available government services such as agricultural extension; hence lifetime career choices of the agricultural community. Finally, the fact that the majority of population in developing countries depends on agriculture as their major source of income and employment, the lack of ownership of land and inequality in the distribution of land holdings are a critical factor in the fight against poverty and unemployment. While the strategies employed in the implementation of the land reform programs that were intended to address the problem may vary, the two most commonly used paths to land reform are expropriation and the market based approaches. In this study, we focus on the experience of fourteen countries in the Southern African Development Community (SADC), where inequality in the landholding distribution that existed during the colonial era continued into the post-independence periods, to empirically investigate the effect land reform approaches on the standard of living of the population in the countries considered. To address the wealth (land) redistribution question, we use two empirical frameworks, one incorporating land reform in the Barro and Sala-I-Martin (1995) type model to capture the net effect of land reform on economic growth of SADC countries after controlling for the factors that have been found to affect economic growth, where economic growth is measured by the average growth rate of per capita gross domestic product. The second determines the effect of the two main land reform approaches on agricultural performance. Agricultural performance is measured by the change in the agricultural production index. In both models we separate the effects of willing seller willing buyer (WSWB) and expropriation. The central findings of this study, based on Arellano-Bond dynamic panel GMM estimations, are the positive statistically significant coefficients on the variables WSWB and expropriation. Although both wealth redistribution options appear to have a positive impact on the economy, WSWB approach seems to be the most efficient way to redistribute land for agricultural production. Our future work is to investigate the effectiveness of land reform policy as an inequality reducing tool in Sub-Saharan African countries.

Elasticities of Demand for Food in Nigeria

KWABENA GYIMAH-BREMPONG (University of South Florida)
OLUYEMISI KUKU-SHITTU (NSSP-IFPRI)

View Paper 16 Abstract (click to show/hide)

Elasticities of Demand for Food in Nigeria Abstract by Kwabena Gyimah-Brempong, USF, Tampa and Oluyemisi Kuku-Shittu, IFPRI, Abuja Agriculture forms the back-bone of most African economies; Nigeria is not an exception. Agriculture accounts for 22% of the rebased GDP and about 68% of employment. Nigeria embarked on an ambitious program to transform is agricultural sector from a traditional subsistence agricultural system to modern scientific based commercial farming when it introduced the Agricultural Transformation Agenda (ATA) in 2011. Among other polices to achieve this transformation are trade restrictions to protect domestic farmers. These trade policies have welfare implications (especially on the poor) which partly depends on the elasticities of demand for imported food in Nigeria. Yet very little is known about the elasticities of demand for food in Nigeria, especially the degree to which imported food and domestically produced food items are substitutable in consumption. In this paper, we use two waves of Nigeria’s Living Standards Measurement Survey-Integrated Survey on Agriculture (LSMS-ISA) data to investigate the elasticities of demand for food among Nigerian households. Specifically, we use we use a linear expenditure system to estimate the elasticities of demand for imported and domestic staple foods, including rice, cassava, yams, bread, and meat both at the national and regional levels. We also estimate demand elasticities among the households in income quintiles. We find that a large portion of expenditures on food items in Nigeria can be characterized by subsistence consumption, that both income and price elasticities of demand of both imported and domestically produced food items are very low. The calculated elasticities of substitution among food items, especially between imported rice and domestically produced food items, is very low. Finally, we find that demand elasticities of all food items is lower in households in lower income quintiles. Our results have important welfare policy implications.

Health Care Expenditures in African Nations: A Panel Unit Root and Cointegration Analysis

MEKONGCHO T. METUGE (Hunan University)
ABOUBACAR BADAMASSI (School of Economics and Management, China University of Geosciences,Wuhan)

View Paper 17 Abstract (click to show/hide)

This paper identifies, analyzes and ultimately investigates the long-run economic relationship between the determinants of healthcare expenditures (HEXP) in African countries as well as the extent of the underlying link and implications existing between them. We use a longitudinal dataset of 45 African countries over a period of 17 years from 1995-2011. Employing panel data unit roots and co-integration techniques there is evidence of a long-run relationship between HEXP and real per capita GDP. We include government expenditures, to the best of our knowledge, a never previously tested variable in the African health economics literature, foreign aid fungibility and population dependence are equally controlled for. Furthermore we investigate co-integration properties of the variables and conclude mixed results ranging from bidirectional and unidirectional Granger causalities. We also generate country-specific HEXP as well as income-group variations to investigate the HEXP growth path/evolution. As a result, we observe that real per capita income government expenditure and foreign aid schemes estimates are all statistically significant and have a positive link to real per capita healthcare expenditures. On average, health care spending grows slightly faster than income hence its income elasticity is considered a luxury good. Population dependency showed mixed results.

Discussants:

STEVE ONYEIWU (Allegheny College)
DARLINE AUGUSTINE (Rochester Institute of Technology)
MALOKELE NANIVAZO (UN-WIDER)
OUSMAN GAJIGO (African Development Bank)
THOURAYA TRIKI (African Development Bank)
JOHN C. ANYANWU (African Development Bank)