SOURCES OF ECONOMIC GROWTH AND TECHNOLOGY TRANSFER IN SUB‐SAHARAN AFRICA1

This paper provides some empirical evidence on the sources of growth in sub‐Saharan Africa (SSA). Within the classical convergence framework, several macroeconomic, socio and political factors are identified as affecting the steady state growth paths of the SSA countries. The rejection of the constant technology growth rate assumption implied by the linearised Solow‐Swan growth specification suggests differences in the economies' technology growth rates. An endogenous technology growth model is estimated to measure contributions of diminishing returns and technology transfer to the rate of conditional convergence in the region. The results carry important policy implications for improving the standard of living and economic growth rate of African countries.     

THE ECONOMIC IMPACT OF HIV/AIDS ON SMALL,MEDIUM AND LARGE ENTERPRISES1

Based on the Bureau of Economic Research (BER's) 2005 HIV/AIDS survey, this paper provides a snapshot view of the nature and the extent of the impact of HIV/AIDS on companies of different sizes in South Africa, as well as their response to the epidemic. Whereas the focus of most of the previous workplace surveys has been on “evaluating workplace responses”, the present study also considers the economic impact of HIV/AIDS. This study provides evidence of the impact of HIV/AIDS on the largest sample of small, medium and large companies in South Africa to date. The survey results suggest that employer responses are strongly linked to company size, with the majority of medium and large companies indicating that they have an HIV/AIDS policy in place and small companies having done little in the way of action against the epidemic.     

THE EFFECT OF ACCESS TO IMPROVED WATER SOURCES AND SANITATION ON ECONOMIC EFFICIENCY: THE CASE OF SUB‐SAHARAN AFRICAN COUNTRIES

This paper evaluates the effect of access to improved water sources and sanitation on 41 sub‐Saharan African (SSA) countries' economic efficiency and growth. For this reason data envelopment analysis (DEA), bootstrap techniques and probabilistic approaches are used. The empirical results indicate that SSA countries' economic efficiency is positively influenced by the access of population both on improved water sources and sanitation. Finally, when the provision of access to improved water sources is provided to more than 50% of the population, the positive effect on countries' economic efficiency is much greater compared with the effect of providing sustainable access to improved sanitation to the same proportion of population.     

THE LEGACY AND CHALLENGE OF FISCAL POLICY IN SUB‐SAHARAN AFRICA1

This paper traces salient aspects of the evolution of fiscal policy in sub‐Saharan Africa since 1960 and highlights the need for further reforms to consolidate the gains of the recent past. The fiscal position of the sub‐Saharan African region as a whole has improved markedly during the past ten years, but most countries still face formidable fiscal challenges. To consolidate the progress made during the past decade and to tackle the remaining problems, sub‐Saharan African policymakers should remain firmly committed to sound fiscal policies.     

IMPACT ON ECONOMIC GROWTH OF DIFFERENTIAL POPULATION GROWTH IN AN ECONOMY WITH HIGH INEQUALITY

The economic growth of South Africa has been disappointing over the last quarter century. This note addresses a conceptual problem that arises because of composition effects. Two important features of the South African economy are, first, its extreme inequality (primarily between the white population and the African population). Additionally, the African population has been growing rapidly, while the white population has experienced a declining share. This note derives an explicit equation for the impact of inequality and population-growth differences on the growth of per capita GDP. It shows that the combination of divergent population growth and high inequality can lead to an apparent drag on measured economic growth even though the components, and a more adequate measure of economic welfare, are growing at a healthy rate.     

THE GENERATIVE POWER OF AIR FREIGHT IN THE TRADE OPENNESS – ECONOMIC GROWTH NEXUS IN AFRICAN COUNTRIES

Foreign trade matters considerably more than ever in today's integrated economies, and the wealth of benefits afforded by air transport is one of the cornerstones of international trade. Therefore, to shed light on the precise role of air cargo, seen as an important motor of growth, this paper provides an empirical model to examine the relationships among trade openness, air freight volume and GDP per capita using panel cointegration techniques for a sample of Economic Commission for Africa (ECA) countries during the 1970‐2002 period. The analysis substantiates that there are cointegrated relationships among the three variables and that they are bound together in a long‐run equilibrium. Furthermore, evidence from fully modified Ordinary Least Squares panel estimations also indicates that positive trade and air freight shocks contribute to real GDP per capita. In addition, improvements in air cargo services are accompanied by an increase in trade openness in ECA countries and vice versa. These results underscore the important role of air freight and demonstrate that it should not have been overlooked in earlier studies. Finally, the empirical findings have important policy implications for our sample countries.     

THE IMPACT OF THE EU BLUE CARD POLICY ON ECONOMIC GROWTH IN THE AFRICAN SENDING COUNTRIES

In 2009 the European Union (EU) adopted a new migration policy instrument – the Blue Cards (BC) – for attracting highly skilled workers to the EU. The present paper examines the potential impacts, which BC may cause on the less developed sending countries (LDC). According to the adopted framework of innovative capital, the BC will reduce human capital in LDC. In addition, BC will also have a negative impact on knowledge capital. These findings suggest that the BC is not coherent with the EU's development policy. Without appropriate policy responses, BC fade the developing country growth prospects away. In order to address the skill drain issues, we propose and examine alternative migration policy options for the LDC.     

HIV/AIDS AND POVERTY IN SOUTH AFRICA: A BAYESIAN ESTIMATION OF SELECTION MODELS WITH CORRELATED FIXED‐EFFECTS

In this paper, we estimate the causal impact of human immunodeficiency virus/acquired immune deficiency syndrome (HIV/AIDS) on monetary poverty using a panel database from South Africa. We treat endogeneity and selection problems associated with HIV/AIDS by a selection model that includes correlated fixed effects both in the level and in the participation equations, which are estimated simultaneously via original Bayesian methods. We model the consequences of the illness on both labour income and income transfers, and disentangle between urban and rural households. While no significant impact of HIV/AIDS on labour income is found because of households' recomposition, we find a substantial fall in received transfers among rural population and a dramatic increase in chronic poverty.     

REGIONAL FINANCIAL INTEGRATION IN SUB‐SAHARAN AFRICA – AN EMPIRICAL EXAMINATION OF ITS EFFECTS ON FINANCIAL MARKET DEVELOPMENT

This article examines the effects of political agreements on regional financial integration (RFI) on financial market development and access to and cost of finance in Sub‐Saharan Africa (SSA). Our results suggest that RFI positively affects financial development – measured very broadly as ratio of liquid liabilities to gross domestic product (GDP) – when combined with a sufficient level of institutional quality. If institutional quality is below a threshold level, RFI apparently has negative effects on financial development. However, we cannot find any significant effects of RFI on the ratio of private credit to GDP or on the efficiency of the banking sector. Regarding the effects of RFI on access to and costs of finance of enterprises in SSA, our results are mixed. We can find no significant effect of RFI on access to finance for all firms in the aggregate, but the results indicate that RFI actually impedes small firms' access to finance. Furthermore, there is a significant positive influence of foreign bank involvement on the severity of the credit constraint for small enterprises, while we do not find such an influence for large enterprises. These results provide some support for the foreign bank barrier hypothesis in the context of RFI.     

MIGRATION AND ECONOMIC GROWTH IN BRAZIL: EMPIRICAL APPLICATIONS BASED ON THE SOLOW‐SWAN MODEL

The paper addresses the question of whether migration plays a role in the determination of the per capita incomes in sub‐regions of Brazil. In order to discuss this relationship, we slightly modified the Solow‐Swan model with migration to better resemble the Brazilian context. Based on this model, we determined theoretically five different possibilities for the spatial dynamics regarding net migration, human capital differentials between migrants and nonmigrants, and capital stock per effective worker. We applied this framework to census data and the microregions in Brazil were empirically classified in one or other of these possibilities with the multivariate technique of cluster analysis. Finally, we used econometric models with instrumental variables applied to panel data and observed a tendency of increase in the variability of per capita income due to migration.     

THE ROLE OF SOCIAL GRANTS IN MITIGATING THE SOCIO‐ECONOMIC IMPACT OF HIV/AIDS IN TWO FREE STATE COMMUNITIES1

Social grants may play an important role in mitigating the impact of HIV/AIDS. Eligibility for these grants is driven in part by the increasing burden of chronic illness, the mounting orphan crisis and the impoverishment of households associated with the epidemic. This article investigates the role of social grants in mitigating the socio‐economic impact of HIV/AIDS in South Africa, using data from a panel study on the household impact of the epidemic. Social grants reduce inequality and decrease the prevalence, depth and severity of poverty in affected households. However, these transfers also have disincentive effects on employment, while non‐uptake is in some cases higher amongst the poorest.     

FINANCE AND GROWTH: NEW EVIDENCE ON THE ROLE OF INSURANCE

This paper provides new evidence that sheds light on the impact of insurance sector development on output growth, capital accumulation and productivity improvement, using data from 51 countries (developed and developing) during 1981‐2005. The dynamic panel data analysis results demonstrate that insurance sector development affects growth predominantly through productivity improvement in developed countries, while in developing countries it promotes capital accumulation.     

EXPORT‐LED GROWTH IN CHILE: ASSESSING THE ROLE OF EXPORT COMPOSITION IN PRODUCTIVITY GROWTH

This study examines the export‐led growth hypothesis using annual time‐series data from Chile in a production function framework. It addresses the limitations of the existing literature and focuses on the impact of manufactured and primary exports on productivity growth. In order to investigate if and how manufactured and primary exports affect economic growth via increases in productivity, several single‐equation and system cointegration techniques are applied. The estimation results can be interpreted as evidence of productivity‐enhancing effects of manufactured exports and of productivity‐limiting effects of primary exports.     

ECONOMIC GROWTH AND THE STRUCTURE OF TAXES IN SOUTH AFRICA: 1960–2002*

One tenet of taxation is its distorting effect on economic behaviour. Despite the economic inefficiencies resulting from taxation, it is widely believed that taxes impact minimally on the economy's growth rate. Evidence in developing countries generally supports this view. In this paper, we present evidence that tax distortions in South Africa may be much more severe. Using tax and economic data from 1960 to 2002 and a two‐stage modelling technique to control for unobservable business cycle variables, we examine the relationship between total taxation, the mix of taxation and economic growth. We find that decreased tax burdens are strongly associated with increased economic growth potential; in addition, contrary to most theoretical research, decreased indirect taxation relative to direct taxation is strongly correlated with increased economic growth potential.     

THE ROLE OF HUMAN CAPITAL IN CHINA'S TOTAL FACTOR PRODUCTIVITY GROWTH: A CROSS‐PROVINCE ANALYSIS

This paper studies the role of human capital in China's provincial total factor productivity (TFP) growth over 1985–2004. The stochastic frontier approach is employed to measure the productivity growth of Chinese provinces. Human capital is measured both qualitatively and quantitatively. In particular, enrolment rates at various levels of schooling are used to represent human capital composition. After controlling for endogeneity, we find that human capital has significant and positive effects on the TFP growth of Chinese provinces. However, when education quality is incorporated, productivity growth appears to be significantly enhanced by quality improvements in primary education only. Regional impacts of human capital are found to differ at various levels of schooling. In the eastern region of China, productivity growth is significantly associated with secondary education. TFP growth in the central region is mainly promoted by primary and university education. Yet in the western region, primary education plays the most prominent role.     

MEASURING THE IMPACT OF EDUCATIONAL INTERVENTIONS ON THE ACADEMIC PERFORMANCE OF ACADEMIC DEVELOPMENT STUDENTS IN SECOND‐YEAR MICROECONOMICS

This paper analyses the impact of educational interventions made in the first‐ and second‐year microeconomics courses on academic development students' final mark in the second‐year course. It also addresses issues of methodology, specification, and statistical analysis with respect to other studies in the field. The results suggest that the educational interventions in the first‐year had a positive impact on the academic performance of the academic development cohort, relative to the mainstream cohort for the first period (2000‐2002). The results also suggest that the educational interventions introduced in the second period (2003‐2005), in the form of voluntary workshops, improved the academic performance of the academic development and mainstream cohorts.     

ECONOMIC ANALYSIS ON THE URBAN–RURAL DISPARITY IN HUMAN CAPITAL IN CHINA

With China's economic development and capital accumulation in the industrial sectors, the human capital level of the labours moving from the rural areas could no longer meet the demand of the industrial sectors. Therefore, “structural shortage of technical labour” emerged in the labour market as a result of excess of demand for high‐skilled workers. Previous literature mostly focused on the relationship between rural human‐capital level and labour movement, income change and economic growth, but in this article, the authors focus on the study of the relative disparity of urban and rural human capital and labour movement, as well as the effect of the change of urban–rural human capital gap on industrial output, profit and social welfare. This article shows that bridging the urban–rural gap in respect of human capital level could not only improve the situation of the “structural shortage of technical labour,” but also have a positive effect on the general social welfare.     

THE RELATIONSHIP BETWEEN LABOUR MARKET DYNAMICS AND HIV/AIDS PREVALENCE IN SOUTH AFRICA ‐ A LITERATURE REVIEW1

The aim of this literature review is to analyse the contribution of current research and literature to an understanding of the relationship between labour market dynamics and HIV/AIDS prevalence in South Africa. It highlights and assesses the extent to which those factors that are regarded as determinants of HIV susceptibility, AIDS vulnerability and prevalence, interact with differentiation in the labour market. The conclusion is that current research studies do not sufficiently consider a more nuanced relationship between complex labour market dynamics and socio‐economic risk factors driving HIV/AIDS susceptibility and vulnerability.     

LONG MEMORY IN THE VOLATILITY OF AN EMERGING FIXED‐INCOME MARKET: EVIDENCE FROM SOUTH AFRICA

This paper tests for long memory in volatility of fixed‐income returns; specifically, South Africa's local currency 10‐year government bond, given that the characterisation of stochastic long‐memory volatility is of interest and importance in portfolio and risk management. The long‐memory parameter is estimated using methods based on wavelets, which have gained prominence in recent years. Evidence of long memory in fixed‐income return volatility is conclusively demonstrated across a variety of volatility measures and wavelet forms. This finding suggests a pattern of time dependence, which may potentially be exploited to generate improved volatility forecasting performance especially over long horizons. This paper further extends the extant literature by comparing the predictive power of long‐memory forecasts with those obtained from a standard (short‐memory) generalised autoregressive conditional heteroskedasticity (GARCH) process. The results of this exercise suggest that the information content of long‐memory models does not lead to improved forecast accuracy. The GARCH(1,1) model is shown to provide the best forecasts across most horizons (i.e. daily, weekly and monthly). Forecast performance is further revealed to be sensitive to the choice of volatility proxy used. Finally, the derived volatility forecasts are generally very close, and in some cases, almost indistinguishable.     

COLONIALISM AND LONG‐RUN GROWTH IN AUSTRALIA: AN EXAMINATION OF INSTITUTIONAL CHANGE IN VICTORIA'S WATER SECTOR DURING THE NINETEENTH CENTURY

Institutional change in water rights in the nineteenth century Australian colony of Victoria raised institutional efficiency, which contributed to long‐run economic growth. High‐quality human capital and the extension of voting rights (franchise) were crucial for efficient institutional change in the water sector. Quality human capital (literacy) appeared to increase the rural population's awareness of the economic impact of the existing structure of water rights that may have constrained growth in the agricultural sector and reduced investment incentives. Extension of the franchise allowed the rural population to exert political pressure for enactment of change in water rights, which resulted in efficiency‐enhancing policies and efficient institutions. The findings show these two factors were more important than Victoria's British colonial heritage in determining whether growth‐enhancing institutional change took place.