Political instability, investment and economic growth in Sub-Saharan Africa

This paper explores the relationship between political instabilityand economic growth in Sub-Saharan African nations. A more comprehensivemeasure of political instability than has previously been developedis used in combination with a simultaneous equations model anddynamic panel estimation approach to produce several interestinginferences. First, the statistically significant inverse relationshipbetween political instability and economic growth identifiedby earlier studies is confirmed by the estimates presented here.Second, the estimated system of equations indicates that economicgrowth and political instability are jointly endogenous. Third,in addition to the direct impact that political instabilityhas upon growth, estimates confirm the hypothesis that politicalinstability indirectly decreases economic growth by decreasinglong-run capital accumulation. Fourth, failure to account forthe dynamic nature of growth equations as well as the endogeneityof explanatory variables may produce biased effects of politicalinstability on growth. Fifth, the broad measure of politicalinstability we use in this study can better capture the effectsof political instability on economic growth than 'elite' instabilitythat has been used by earlier researchers. Finally, principalcomponents estimation is used to develop a measure of politicalinstability that can serve as an alternative to the arbitraryweighting scheme used in previous research.     

The Effect of the Liberalization of Investment Policies on Employment and Investment of Multinational Corporations in Africa

Abstract: There has been a remarkable shift in the attitudes towards globalization. Specifically, the discussion among academics and policymakers has shifted from whether globalization should be encouraged to how countries can position themselves to benefit from globalization. This paper focuses on one aspect of globalization — the liberalization of investment policies — and analyzes its impact on employment and investments by multinational corporations in Africa. We use data for 33 countries over the period 1984–2003 and we employ a dynamic panel estimator for our analysis. There are two major findings. First, liberalization has a significant and positive effect on investment. Second, liberalization does not have a direct impact on multinational employment — the effect is indirect: liberalization stimulates multinational investments which in turn increases multinational employment. By increasing investment and employment from multinational firms, these liberalization programs contribute to poverty alleviation.     

Production of public safety: Are socioeconomic characteristics of local communities important factors?

This paper uses the translog cost function and cross section data from Florida to investigate the importance of socioeconomic characteristics (SEC) of local communities in the production of public safety. The approach used is noteworthy in four respects: (1) the underlying production function is specified as an AGEM production function; (2) SEC are treated as non-purchased fixed inputs; (3) two variables are used to proxy SEC in estimation; and (4) the paper test for the existence of endogenous quality differences in safety. It is shown that exclusion of SEC from the production (cost) function of safety leads to misspecification; and hence they provide a misleading guide to policy.     

Corruption, economic growth, and income inequality in Africa

This paper uses panel data from African countries and a dynamic panel estimator to investigate the effects of corruption on economic growth and income distribution. I find that corruption decreases economic growth directly and indirectly through decreased investment in physical capital. A unit increase in corruption reduces the growth rates of GDP and per capita income by between 0.75 and 0.9 percentage points and between 0.39 and 0.41 percentage points per year respectively. The results also indicate that increased corruption is positively correlated with income inequality. The combined effects of decreased income growth and increased inequality suggests that corruption hurts the poor more than the rich in African countries. Received: March 19, 2001 / Accepted: December 14, 2001 RID="*" ID="*" An earlier version of this paper was presented at the first AmFiTan International Conference on Development Ethics in February 2000, Dar er Salaam, Tanzania. I thank two anonymous referees of this Journal for helpful suggestions. I am, however, solely responsible for any remaining errors.     

Crime and Race: A Plea for New Ideas

A review of the economics of crime literature provides an unsatisfactory explanation of the higher crime rates among African Americans compared to crime rates for whites in the US. This address challenges economists, particularly African American economists, to come up with new and credible ideas to explain the observed crime differential that could influence policies to decrease crime in the African American community.     

Scale elasticities in Ghanaian cocoa production

The objective of this study is to develop a simultaneous equations model of profitability, concentration, advertising expenditures and research and development outlays. The data used in the estimation are subjected to regression diagnostics in an effort to determine the importance to the estimation results of a subset of the data that can have a disproportionate influence. The estimation results, especially for the advertising expenditures relationship and the research and development outlays equation, do change when a truncated data sample (based on the omission of the outliers) is used. This serves partly to explain why there is some disagreement in the literature on market structure and economic performance with regard to the impact of several economic factors.     

Telecommunications Investment in Africa: Implications of US Reform of the International Settlement Rate System*

Abstract: This paper investigates the possible effects of the US reform of the international settlement rate system on telecommunications investment in Africa. We estimate a telecommunications investment equation using a panel data of 51 African countries during the 1991–2003 period and find that settlement payments have significantly positive effects on telecommunications investment in African countries. A 10 percent increase in settlement payment, on average, increases the telecommunications investment expenditure to GDP ratio by 3.4 percent over a three‐year period. Using previously calculated revenue loss from the US reform, our estimates suggest that African countries stand to lose between 4.4 to 11 percentage points of their telecommunications investment in the medium run and with it, possible decreases in income growth rate. However, we argue that African countries can counter the effects of this revenue loss by increasing the efficiency of telecommunications investment through appropriate market restructuring, including the promotion of competition and privatization.