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Manchester Grand Hyatt, Promenade A
African Finance and Economics Association
Infrastructure and Finance in Africa
Saturday, Jan. 4, 2020 10:15 AM - 12:15 PM (PDT)
- Chair: Boris Houenou, Washington State University
Greasing the Wheels of Regional Integration: Infrastructure as a Catalyst for Trade, Innovation, and Growth in Africa
AbstractNow, more than ever, infrastructure integration in Africa has become critical to the rebalancing of Africa’s growth strategy towards increased intraregional trade. This is particularly so because of the recent wave of protectionism and populism around the world. This paper investigates the extent to which infrastructure development and integration can act as a catalyst for trade, productivity growth, and income improvements in Africa; and examines some important policy issues and challenges related to infrastructure development and integration in Africa. Our findings show that infrastructure does improve trade, productivity, and innovation in sub-Saharan Africa. Specifically, the infrastructure sector with the strongest multiplier effect on economic outcomes is the ICT sector, followed by the transport, electricity, and water sectors, respectively. This ranking informs our recommendation that infrastructure integration and development in Africa should be prioritized according to the ranking of their multiplier effects on the rest of the economy. Furthermore, our findings show that infrastructure has had the strongest impact on economic outcomes in the SADC region, which makes SADC a type of flying-geese leader for the other regional economic communities
Infrastructure, Trade Transaction Costs, and Trade: The Imperatives for African Economies
AbstractAbstract: Using the new index of infrastructure and comprehensive bilateral trade costs data spanning the years 2002-2011, we examine: a) the impacts of aid-for-trade (AFT) from bilateral and multilateral sources on trade costs facing AFT recipient countries and b) identify the components of infrastructure that are relatively influential in reducing bilateral trade costs. Our results from the estimation of a multi-level mixed-effects model indicate that increased AFT inflows from both bilateral and multilateral sources reduce trading costs as is an improved level of infrastructure in the AFT recipient countries. While the results are persistent across sectors, the observed effects vary consistently both across the sources of AFT (Bilateral or Multilateral) and the quality and components of infrastructure in the recipient countries. Our results have important policy implications relevant for strengthening the effectiveness of aid-for-trade and further aid extensions in general and especially targeted toward infrastructure improvements.
Where and Why Do Chinese Firms Invest in Africa: Application of a Spatial Analysis
AbstractIn an attempt to expand the manufacturing sector, several African countries have been providing incentives to attract foreign investors. Some Chinese firms have responded to these incentives and have invested in several African countries. Not all African countries received a big influx of Chinese firms, however. Anecdotes and some descriptive statistics suggest that natural resource endowment is one factor that may have influenced the location choice of Chinese firms within Africa. Theory suggests that other relevant factors, including agglomeration and congestion effects as well as cost of production differentials, also play an essential role in influencing location decision of firms. Using Chinese firm-level overseas investment data from the Chinese Ministry of Commerce (MOC) and China Global Investment Tracker, this study attempts to present empirical evidence on the determinants of location decision for Chinese firms in African countries. A spatial data analysis method will be adopted to present relevant policy insights for policymakers in Africa. Findings from the study would help policymakers to design informed policies to attract beneficial foreign investors to priority sectors in each country. Other developing countries that compete to attract Chinese investment would also benefit from the findings of the study
Africa’s manufacturing development under the rise of China: Threat or opportunity?
AbstractThe study set out to investigate whether China’s rise complements or competes with Africa’s manufacturing sectors, using a system GMM estimator. The findings reveal that imports of intermediate manufactured goods from China boost manufacturing production in African economies but that total imports of manufactured goods dampen the growth rate of manufacturing production. Another key finding is that the positive impact of intermediate imports from China is lower when FDI is abundant. Also, although the China-invested SEZs in Africa likely contribute to manufacturing development, the majority of FDI inflows into Africa are directed not toward manufacturing sectors in Africa but instead to extractive sectors, which are less labor-intensive. Taken together these findings suggest that the African manufacturing sector faces a potential long-term inadequacy of competitiveness and investments in productivity-enhancing assets and skilled labor. These findings call for a policy of urgency in technology transfer and various productivity-enhancing assets.
Explaining Firm-level Gender Productivity Differential in Africa
AbstractTotal factor productivity is a fundamental measure of economic efficiency and, generally, a key determinant of welfare. However, evidence on the determinants of variation in productivity levels across firms in developing countries is limited. We exploit a harmonized firm-level survey dataset of 46 African countries over the period 2006-2018 to explain the total factor productivity gender differential and identify the association pathways. Special focus is placed on behavior with respect to innovation and technology adoption as well as dealing with market inefficiencies and institutional barriers. We construct five composite indices to reflect the broad categories of total factor productivity determinants, estimate several regression specifications, and apply mean- and quantile-based decomposition approaches. Our results suggest that there is a substantial productivity differential by the gender of entrepreneur in Africa, specifically in the Northern and Eastern regions. The observed differential is mainly attributable to differences in unobservable characteristics, as reflected by differences in the returns to the use of foreign-licensed technology, R&D spending, the lack of access to finance, and perceptions of the rule of law, rather than differences in educational or entrepreneurial abilities. These results can be explained by gender-based behavioral differences and existing institutional structures, which can also affect women’s selection of business activity. Direct policy implications stem from our findings of how various determinants affect male and female entrepreneurs differently.
African Development Bank
University of North Florida
University of Massachusetts-Boston
- O1 - Economic Development
- H4 - Publicly Provided Goods