Banking in Africa

From this paper by Thorsten Beck & Robert Cull 

African banks are well capitalized and over-liquid, but lend less to the private sector than banks in non-African developing countries.

The Long-Run Effects of the Scramble for Africa

From a paper by Stelios Michalopoulos & Elias Papaioannou 

. . . civil conflict is concentrated in the historical homeland of partitioned ethnicities. We also document that violence against civilians (child soldiering, village burning, abductions, rapes) and territorial changes between rebel groups, militias, and government forces are more prevalent in the homelands of split groups [from the abstract].

The authors . . .

[E]xploit a new rich geocoded dataset that reports information on more than 43, 000 conflict events over the period 1997−2010 [p. 31].

More specifically . . .

Our most conservative estimates suggest that civil conflict intensity is approximately 30% higher in areas where partitioned ethnicities reside as compared to the homelands of ethnic groups that have not been separated by the national borders. We further find that homelands of partitioned groups experience a 5% to 10% higher likelihood of a territorial control change between the government and rebel groups. It is not only army fighting that is concentrated in the homelands of partitioned groups. Violence against civilians is roughly 40% higher in regions where split groups reside. The evidence thus uncovers the on-going violent repercussions of the colonial border design [p. 2].

HT: Jacob A. Jordaan 

Success in Africa

Publishers Weekly on the book Success in Africa by Jonathan Berman

As strategy consultant Berman explains in his first book, the 54 countries on the African continent contain six of the 10 fastest-growing markets in the world, and 60% of the world's future farming potential. There are more than 150 billion companies in Africa, and more than 500 with annual sales of million. Here, Berman, who has lived and worked in Asia and worked in Africa, informs readers about perspectives on Africa, who works there (including budding CEOs), and why. However, despite the book's great premise, Berman only skims the surface: Africa needs everything, and success in Africa comes from filling it.

An interview with the author is in Humanosphere.  
HT: Tom Murphy. 

Airlines in Africa

Wikimedia Commons

The regulatory framework in Africa in which international airline groups operate is far from uniform. Although several African states have embraced the principles of liberalization with regard to the African market and intra-African air transport, intercontinental routes are still often subject to strict protectionist policies. In order to protect their national carriers, many African governments continue to opt for restrictive regulations in terms of market access, seat capacity and frequency of services. Thus, air transport between Europe/the US and Africa is still based on the complex system of strict bilateral agreements negotiated separately by pairs of countries. Because such policies, by their nature, impose limitations on the volume of tourist traffic, they often have a detrimental influence on the development of tourism and thus also on regional growth in Africa. Only recently have some more liberal African governments started negotiating open skies bilateral agreements with selected European countries and the US. However, it should not be assumed that, if the liberalization and deregulation of air transportation in Africa progresses, the increased tourist traffic will automatically foster economic development in African tourist destinations. P. 26

That paragraph is from a paper by Piotr Niewiadomski.

And more

The role of national authorities can also be critical in owning, or co-owning, national airlines and related infrastructure such as airports. If this is the case, their tendency to protect national airlines and thus to opt for protective bilateral agreements can be very strong. By 1991, almost all African carriers had been owned by the state (Schlumberger 2010). Currently, as many as 25 African states have fully or partially state-owned carriers. While 20 of them are relatively weak competitors in the market, the national airlines of Egypt (Egyptair), Morocco (Royal Air Maroc), Kenya (Kenya Airways), Ethiopia (Ethiopian Airlines) and South Africa (South African Airways) are the strongest carriers in Africa (Schlumberger 2010). Out of the three focal states, only Uganda does not currently have a state-owned airline.

Regarding airports and air navigation services, the situation in Africa is even more complex. In contrast with South Africa, where airports and air navigation services were privatized in the early 1990s (Goldstein 2001; Prins and Lombard 1995), air navigation services and airports in Kenya and Uganda are still in the hands of the government. Thus, in Uganda all airports are owned by the Civil Aviation Authority of Uganda – a state agency of the Ministry of Works and Transport. In Kenya, airports are owned and managed by the Kenyan Airport Authority, while navigation services are provided by the Kenyan Civil Aviation Authority – both having the status of state corporations overseen by the Ministry of Transport. Meanwhile, in South Africa, airports are owned by the Airports Company South Africa (ACSA), whereas air navigation services are provided by the Air Traffic and Navigation Services Company, both established by the state and privatized in the 1990s (see Goldstein 2001; Prins and Lombard 1995). P. 20.

Religion and AIDS in Sub-Saharan Africa

Intriguing, and take it as exploratory. 

Evidence of relationships between religious affiliation and the African AIDS pandemic is found in the medical, religion, and sociology literature. In particular, studies have shown that predominantly Christian countries tend to have higher HIV rates than predominantly Muslim countries. These relationships have been largely unexplored by economists and we seek to identify underlying institutions using a panel of up to 43 sub-Saharan African countries for 1990-2010. Catholic antagonism towards condom use has often but proposed, but we report that the protestant (rather than the Catholic) population share drives the Christianity/HIV correlation. (Also, condom use actually correlates positively with HIV prevalence, though reverse causation likely plays a role). Male circumcision rates have a large negative effect on HIV prevalence. While male circumcision has been linked to Islam in this context, we report that the male circumcision effect is robust to controlling for the Christian population share while the correlation of HIV prevalence and the Muslim population share is not. There is no significant relationship between an index of social regulation of religion and HIV prevalence.

From a new paper by Amanda Mandzik & Andrew T. Young.

Do better roads promote migration or do they discourage it?

Empirical evidence on the impact of improving road networks and transportation systems on migration in developing countries remains scarce and generally provides mixed results. This paper fills part of this empirical gap in the Tanzanian context by answering the following question: do better roads promote migration or do they discourage it? A difference-in-difference estimation is implemented using the Kagera Health and Development Surveys (KHDS), coupled with information on trunk roads upgraded to bitumen standards in the region. On average, migration decreases as upgraded roads improve local living conditions. The impact proves to be greater in absolute value for well-connected communities, as well as for the probability of moving within the Kagera region. However, the effect decreases over time.

That is from a paper (Journal of African Economies, July 2013) by Marie Castaing Gachassin. I did not find the full paper online. By the same author, but from a different paper, I took a table of road density in African countries (other tables and graphs in the paper are also interesting). 

The Historical Effects of the Printing Press (SS-Africa)

From the conclusion of a new paper by Cage & Rueda (July 2013):

In this paper, we study the impact of the early introduction of the printing press by Protestant missionaries in the 19th century. The evidence we obtain from a variety of identification strategies is consistent with our hypothesis that the early introduction of the printing press had some long-term effect on newspaper readership. Moreover its effect goes beyond literacy and education. Through its impact on newspaper readership, we find that proximity to the printing press also increases civic attitudes at the local level. This is of particular interest in the sub-Saharan African context where there is still much to do to fight against corruption and to improve democratic institutions.

Electrification in Africa

Source. 

Remittances and Protests in Africa

This paper investigates whether there is a link between remittance flows and protests in Africa. Studies on protests in the developing world have emphasized domestic factors in the economic and political context, but have overlooked the role remittances may play in affecting an individual’s decision to protest. This paper finds a modest relationship between remittances and protest suggesting that the cost of protesting decreases as one receives private transfers from abroad. The effect of remittances is clearer when taking the political context into account. Under politically open regimes, remittances provide an added resource for individuals to bear the cost of protesting. On the other hand, as polities become more closed individuals receiving remittances may feel discouraged to protest. The mechanisms for the diverging interaction effects between remittances and political openness on protests is a subject for further research.

The source is this paper by Jesse Acevedo.

The graph is also taken from Acevedo's paper. The upward trend might be related to recent democratization in the continent, although more democratization might also be the effect of protests - more technology might have played a role as well.

Teaching in Senegal soon

I will leave soon for Senegal to teach a class on entrepreneurship at AIMS. 

A TED video about AIMS:

We will discuss entrepreneurship in the context of science fiction stories, plus  films. The class program is here.

Support for democracy by gender (20 S-S African countries)

Source.

The authors, García-Peñalosa & Konte (March 2013), conclude:

An alternative hypothesis is that women’s lower support for democracy comes from the fact that democratic transitions are often associated with civil conflict. If women have a higher cost of conflict than men, then they are less likely to support democracy. Our analysis seems to point in this direction.

HT: Eugene Beaulieu. 

Stock market and economic growth (Ghana & Nigeria)

. . . [T]he nature of stock markets and the economies in Africa revealed the reasons for non-causal relationships between stock markets and economic growth in Ghana and Nigeria. The problem of African stock markets is the domination by a single sector, and the often monoproduct economy. Often, the stocks of this sector that account for the greater percent of the GDP are not listed in the domestic stock market, hence, a divorce between the actual performance of the stock market and economic growth. In Ghana, only AngloGold Ashanti, accounts for 70% of market capitalization (Osaze, 2007) while in Nigeria, over 60% of the total market capitalization is accounted for by the Banking sector. The oil and gas sector of the economy of Nigeria and the agricultural sector (cocoa) of that of Ghana are not in their stock markets.

From a paper by Osamwonyi & Kasimu, "Stock Market and Economic Growth in Ghana, Kenya and Nigeria" (International Journal of Financial Research, April 2013).

Textbooks in primary school (Africa)

Using a within-student analysis on eleven Sub-Saharan African countries, we find no average impact of textbook access (whether via ownership or sharing) on the achievement of primary school students. Instead, it is only for students with high socioeconomic standing that one form of textbook access – sharing – has a positive impact.

From the new publishes article "When do textbooks matter for achievement? Evidence from African primary schools" by Kuecken & Valfort (Economic Letters, June 2013).

More than a conclusive answer the findings of the paper raise many questions. 

Democratization and Economic Prosperity (Africa)

That is from a new paper by De Kadt & Wittels. From the conclusions (p. 27):

How does democracy affect economic prosperity? This paper applies a new empirical approach to answer this long-standing question. Using the synthetic control method and new balanced panel data for the period 1975-2008 we estimate unique treatment effects for every African country that democratized in the late 20th century. Our approach takes some important steps toward resolving the inferential problems that compromise existing country-level, cross-national research on the economic consequences of political regimes.

First, we demonstrate with some confidence that democratization does, in fact, matter for economic output. These effects are highly heterogenous across countries: Some states appear to experience a considerable economic boost, while others are estimated to contract as a result of democratic reform. This pattern of effects is consistent with the common finding that democracy has a weakly positive average effect on eco- nomic growth. Further, we present evidence that corroborates some existing theories about the factors that moderate the economic effects of democratization.

The method used is complex, but very interesting.  

African polygamy

From a paper by James Fenske:

Motivated by a simple model, I use DHS data to test nine hypotheses about the prevalence and decline of African polygamy. First, greater female involvement in agriculture does not increase polygamy. Second, past inequality better predicts polygamy today than does current inequality. Third, the slave trade only predicts polygamy across broad regions. Fourth, modern female education does not reduce polygamy. Colonial schooling does. Fifth, economic growth has eroded polygamy. Sixth and seventh, rainfall shocks and war increase polygamy, though their effects are small. Eighth, polygamy varies smoothly over borders, national bans notwithstanding. Finally, falling child mortaility has reduced polygamy.

HT: Clarence Nkengne Tsimpo. 

Success and failure of African exporters

Using a new dataset with transaction-level export data from four African countries (Malawi, Mali, Senegal and Tanzania), this paper explores the determinants of success upon entry into export markets, defined as survival beyond the first year at the firm-product-destination level. We find that the probability of successrises with the number of same-country firms exporting the same product to the same destination, suggesting the existence of cross-firm externalities. We explore several conjectures on the determinants of these externalities and provide evidence suggestive of information spillovers, possibly mediated through the banking system.

Source: Cadot et al (Journal of Development Economics, March 2013). Draft.  

Corruption, education, and free-press (SSA)

Source: Cavazzini & Picaluga Nevado (2013). 

HT: Eugene Beaulieu

Acemoglu et al., on chiefs and economic development in Africa

From a new paper by Acemoglu, Reed, & Robinson (January 2013). 

Based on a unique survey, complemented by field and archival research on the histories of the chieftaincies, paramount chiefs and ruling families of Sierra Leone as far back as sources could deliver, we developed a measure of institutional constraints on the power of paramount chiefs. Using this measure, we show that, consistent with the chiefs as despots view, in places where chiefs are less constrained and more powerful a variety of development outcomes are significantly worse. However, in contrast to expectations that would naturally follow from this view, these more powerful chiefs command greater respect, and their chieftaincies have greater levels of both bonding and bridging type of social capital, generally believed to be associated with better accountability and good governance.

[ . . . ]

We argue that powerful chiefs lead to worse development outcomes because they distort incentives to engage in economically desirable activities through their control of taxation, regulation and the judicial system. Yet at the same time they are associated with higher levels of social capital, particularly bridging activities because they use this capital as a way to control and monitor society. This mechanism may also induce people to invest in patron-client relations with powerful chiefs, thus giving them a vested interest in the authority of chieftaincy. Thus in surveys people do say that they respect the authority of chiefs, but this is not a reflection of the fact that chiefs are effective at delivering services or public goods. Rather, it reflects the fact that rural people are locked into relationships of dependence on the traditional authorities. 

Fascinating, especially the way Acemoglu et al., engage the previous literature, by Mahmood Mamdani, in particular.  

Slave Trade: Why Africa?

A question from a new published paper by Angeles is: Why only Africa?  

Figure 1. African slaves embarked to the Americas

One aspect that set Africa aside from Eurasia during the early modern period was a higher degree of cultural fragmentation. By this we mean that cultural areas, regions within which people would share some essential cultural elements and recognize each other as similar, were smaller in Africa as compared to Eurasia. How this would translate into lower costs for obtaining slaves is not very difficult to see. If we assume, in accordance with Finley, that the enslaving of one's own people was pretty much forbidden in all societies then would-be slave traders need to run their operations against societies other than their own. Eurasia's large cultural areas meant that this required long-distance operations and large-scale military actions, rendering the capture of slaves very costly. Africa's cultural fragmentation, on the other hand, implied that raids of even a few dozen men attacking villages from a nearby region would be a cheap and acceptable way to obtain slaves.

That sugests that Africa was much more culturally fragmented than India, for example. 
The abstract:

This paper offers an integrated analysis of the forces shaping the emergence of the African slave trade over the early modern period. We focus our attention on two questions. First, why most of the increase in the demand for slaves during this period came exclusively from western Europeans. Second, and of most relevance for present-day development outcomes, why was the overwhelming majority of slaves of African origin. Technological differences in manufacturing technology, the specificities of sugar (and other crops') production, and the cultural fragmentation of the African continent all play a role in the analysis. Supporting evidence for each of our claims is provided from a broad corpus of relevant literature.

Determinants of Business Formality in Some African Countries

This paper analyzes the determinants of firms exiting the formal sector after registering at start-up. Using a unique and new dataset from four African countries (Cote d’Ivoire, Kenya, Nigeria and Senegal) with detailed information on firms that have transitioned between formal and informal status, we shed further light on the determinants of formality. We found that productivity and corruption (in terms of informal payments to public officials made by firms) significantly lead to firms going back into the informal sector even after initially registering at start-up. In the other direction, we found that higher productivity, better access to bank finance at start-up and education increase the likelihood of switching to formal status after initially being unregistered or informal at start-up. The results are robust to controlling for many relevant variables and controlling for selection.

That is one more paper that finds that corruption is one of the largest impediments to business formality, in this case in some African countries. That reason is probably more important than a reasonable amount of taxes on business in developing countries. What is important about this paper is that it is not studying what impedes firms to become formal, but rather what makes them go back to informality. 

The paper, by Gajigo & Hallward-Driemeier is here. 

H/t: Catalina Granda Carvajal.