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2020

Authors:

John Dunne, Giorgio d’Agostino, Marco Lorusso and Luca Pieroni

Forthcoming

Military Spending, Persistent Corruption and Long Run Economic Growth.


Abstract:

Journal:Defence and Peace Economics

This paper contributes to the analysis of the impact of military spending and corruption on economic growth, by considering not only the political dimension of corruption, distorting the allocation of resources to sectors, but also the impact on the efficiency of the bureaucratic environment.  It does this by developing the model of Mauro (2004) in the context of an endogenous growth model to deal with corruption in the defence sector. It then uses data from the International Country Risk Guide to produce a novel measure of corruption that combines corruption within the political system, institutional strength, quality of bureaucracy and the degree of military participation in the country and estimates the model for a large panel of countries. The results suggest that both military spending (as a share of total government spending) and corruption have significant negative long run effects on output. As the model also suggests that multiple equilibria can exist, a comparison is made between high and low corruption groups of countries and clear differences are indeed found. These have interesting policy implications, suggesting effort is needed by the international community to encourage and coerce high corruption and military spending  countries, but low corruption and military spending countries are likely to need little attention.

2019

Authors:

Edwards L., Nchake, M.A. and Kaya, T.

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The Size of the Border and Product Market Integration Between Lesotho and South Africa: A Production-Consumption Approach.


Abstract:

Journal:Journal of African Economies
Volume:28
Issue:1
Pages:70-88

Despite efforts to increase integration within Africa, product markets remain segmented between countries. This paper examines the magnitude of price gaps, known as the border effect, between Lesotho and South Africa using retail price data for 49 products in 35 cities over the period 2006–2009. Using a production–consumption pair approach, we estimate that crossing the border between South Africa and Lesotho is associated with an absolute product price gap that widened from 18% in 2006 to 24% in 2009. The structure of relative prices also differs markedly revealing a lack of convergence to a common set of internal relative prices. These results are robust to the choice of alternative production centres in South Africa and the imposition of distance thresholds between region pairs. The results indicate that the border between South Africa and Lesotho remains an impediment to trade flows and price competition, despite their joint membership in a customs union and monetary area.

2018

Authors:

Chacha, P. and Edwards L.

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Exporting to Fragile States in Africa: Firm Level Evidence.


Journal:Review of Development Economics
Volume:23
Issue:3
Pages:1177-1201

This study analyses the effect of fragility in destination markets on firm export behavior and the role of firm size in mediating adverse outcomes. The analysis is conducted using firm transaction data on Kenyan exports to Africa over the period 2004–2013. The analysis reveals that fragility negatively affects a firm's decision to enter a given destination market, reducing Kenya's bilateral trade flows to African countries. Larger firms are more resilient to destination shocks in fragility and are less likely to exit. These results are robust to alternative measures of destination fragility, and the exclusion of bordering countries and the East African Community partner states. Our analysis reveals that the effect of business fragility (regulatory quality, government effectiveness, and control of corruption) dominates that of political fragility (voice and accountability, rule of law, and political stability), although both effects are negative and significant.

Authors:

Anthony Black, David Kapya and Beatrice Conradie

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Can agro-processing lead re-industrialization in Sub-Saharan Africa? A two-stage approach to productivity analysis


Abstract:

Journal:African Journal of Agricultural and Resource Economics
Volume:13
Issue:5

This analysis sits against the backdrop of unsuccessful attempts to reindustrialise Africa. Zambia must diversify from copper dependency to agriculture and the agro-processing sectors, and the question is whether there is enough capacity to deliver jobs or growth. This paper studied the agroprocessing sector, where mean technical efficiency was 42.5% and mean scale efficiency was 81.7%. Beverage firms fared better than food producers and, within food production, meat processing did best, while baking and milling firms did the worst. There are benefits to centralisation and being large scale, although one in five firms was too large. A reindustrialisation programme should focus on the promotion of modern technologies, capacity building and infrastructure development, as well as on improvements in the regulatory framework.

Authors:

Edwards, L., Sanfilippo, M., and Sundaram, A.

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Importing and firm export performance: New evidence from South Africa


Journal: South African Journal of Economics
Volume: 86
Issue: S1
Pages: 79-95


This article uses firm‐level data from company income tax and customs declarations from South Africa to analyse the complementary relationship between direct access to imported intermediate inputs and firm exports in the manufacturing industry. There are two main findings. The first is on firm heterogeneity, showing that firms that import and export consistently demonstrate premiums in terms of productivity, employment, wages and capital intensity in production compared to firms that do not trade, or only export or import. The second supports the hypothesis that importing raises exports, especially if inputs are sourced from advanced economies.

Authors:

Nchake, M., Edwards, L., Rankin, R.

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Closer monetary union and product market integration in emerging economies: Evidence from the Common Monetary Area in Southern Africa


Journal: International Review of Economics & Finance
Volume: 54
Pages: 154-164

This study utilizes detailed micro price data to estimate the impact of closer monetary union on the integration of product markets across countries, considering two policy shocks from Botswana. Using the difference-in-difference approach, the results reveal that the adoption by Botswana of a crawling peg exchange policy reduced price differences between South Africa and Botswana by 4 percentage points. Subsequent changes in the Botswana monetary policy regime further reduced price gaps by 2 percentage points. These results provide support for the effectiveness of alignment in interest rate and exchange rate policies in enhancing the integration of product markets between countries.

2017

Authors:

Chacha, P. and Edwards L.

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Exporting to Fragile States in Africa: Firm Level Evidence.


Journal:Review of Development Economics
Volume:23
Issue:3
Pages:1177-1201

This study analyses the effect of fragility in destination markets on firm export behavior and the role of firm size in mediating adverse outcomes. The analysis is conducted using firm transaction data on Kenyan exports to Africa over the period 2004–2013. The analysis reveals that fragility negatively affects a firm's decision to enter a given destination market, reducing Kenya's bilateral trade flows to African countries. Larger firms are more resilient to destination shocks in fragility and are less likely to exit. These results are robust to alternative measures of destination fragility, and the exclusion of bordering countries and the East African Community partner states. Our analysis reveals that the effect of business fragility (regulatory quality, government effectiveness, and control of corruption) dominates that of political fragility (voice and accountability, rule of law, and political stability), although both effects are negative and significant.

Authors:

Anthony Black, Justin Barnes and Kriengkrai Techakanont

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Industrial policy, multinational strategy, and domestic capability: A comparative analysis of the development of South Africa’s and Thailand’s automotive industry


Abstract:

Journal: European Journal of Development Research
Volume: 29 
Issue: 1
Pages: 37-53


For developing countries seeking to promote the automotive industry, it has been essential to attract foreign investment, and the terms under which this takes place are key determinants of the resulting development impact. This article examines the development of the sector in South Africa (SA) and Thailand. Both industries have been driven by growing domestic demand, government support and rapid international integration, but the Thai industry has grown at a significantly faster pace. The article demonstrates that the Thai automotive industry has major firm-level cost and market advantages. The combination of a favourable location, supportive trade and industrial policy and supply-side strengths has led to large-scale investment and Thailand’s development as a major regional hub. Foreign investment in SA on the other hand has been at a lower level, aimed primarily at accessing the domestic market. The consequence has been more limited development of the automotive cluster.

2016

Authors:

Anthony Black and Thomas McLennan

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The Last Frontier: Prospects and Policies for the Automotive Industry in Africa


Abstract:

Journal: International Journal of Automotive Technology and Management
Volume: 16 
Issue: 2
Pages: 193-220

Since the turn of the century, sub-Saharan Africa (SSA) has grown very rapidly and the expansion of the middle class is evident in the surge of demand for vehicles albeit from a very low base. The first part of the article quantifies the rapid growth in vehicle sales, which is being met mainly by imports, especially of used cars. Outside of South Africa, domestic production is minimal and the article goes on to consider the question of whether and how the region can begin to meet this booming demand by developing its own industry. The level of industrialisation in most parts of SSA is low and manufacturing capabilities are limited. Nevertheless, a number of the larger countries, for example Nigeria and Kenya, are putting policies in place to encourage domestic production. Small scale investments in assembly are underway. To make the most of this opportunity, African countries will need to adopt appropriate policies and also accelerate the process of regional integration to allow for sufficient market scale.

2015

2014

Authors:

Anthony Black and Hein Gerwel

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Shifting the growth path to achieve employment intensive growth in South Africa


Abstract:

Journal: Development Southern Africa
Volume: 31 
Issue: 2
Pages: 241-256

‘Employment intensive growth’ has become a centrepiece of government policy and implies that at any given level of growth, the economy needs to become more labour absorbing. State intervention (or the lack of it) is examined in two areas that are important for employment – agriculture and manufacturing. In the case of agriculture, it is argued that declining and ineffective state support has accelerated the rationalisation of commercial agriculture and failed to regenerate agriculture in the former Bantustans. With regard to the manufacturing sector, we argue that since 1994 the government has set a multiplicity of objectives but, de facto, there has been a surprising level of continuity in the overly generous assistance for heavy, capital-intensive industry. This paper argues that the negative impact of previous ‘distortions’ requires much more than a levelling of the playing field via market-based reforms. Pro-employment policies have to be placed at the centre of the policy agenda.

2013

2009

Authors:

Raphael Kaplinsky and Mike Morris

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The Asian Drivers and SSA: Is There a Future for Export-oriented African Industrialisation?

Abstract:

Journal:World Economy
Volume:32
Issue:11
Pages:1638-1655

Export-oriented industrialisation is the orthodoxy and is widely indicated as a development path for sub-Saharan Africa. In recent years there has been a surge of clothing exports from a limited number of SSA economies to the US. In 2006 these exports accounted for more than half of SSA's manufactured exports (excluding South Africa). However, the ending of quota controls on Chinese clothing exports to the US led to a significant fall in these exports. Is this a harbinger for the future of export-oriented industrialisation in SSA in a world of a level trading playing field?

Authors:

Anthony Black

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Location, Automotive Policy, and Multinational Strategy: The Position of South Africa in the Global Industry since 1995

Abstract:

Journal : Growth and Change
Volume: 40
Issue : 3
Pages : 183-512

The South African automotive sector has become much more integrated into the global industry since 1995. Rapid export expansion has shifted its orientation fundamentally away from its focus on the small domestic market and the industry is widely regarded as a success story of South Africa’s democratic transition. However, important vulnerabilities remain, and it is by no means clear that the mode of integration has been particularly favourable to the long-term development of the industry. The relatively small size of South Africa’s domestic market and its regional location pose clear disadvantages in terms of attracting international investment.

Authors:

Raphael Kaplinsky and Mike Morris

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Chinese FDI in Sub Saharan Africa: Engaging with large dragons

Abstract:

In the context of widespread interest in the impact of Chinese investment in Sub-Saharan Africa (SSA), this paper focuses on SSA’s engagement with large state-owned Chinese firms investing in SSA’s resource and infrastructure sectors. Evidence is provided on the extent of different types of Chinese investment, before focusing on the distinctive character of large scale state-owned Chinese investors whose investments are closely bundled with aid and trade. The paper concludes that SSA countries should maximise the opportunities opened to them by their resource-base by adopting a similarly integrated and focused response to Chinese (and other large) investors who seek to draw on the continent’s natural resources. Keywords: Foreign Direct Investment, Aid, China, Asian Drivers, Sub-Saharan Africa, State owned enterprises. To be published in European Journal of Development Research Special Issue, Vol. 24, No. 1, 2009

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