THE IMPACT OF HIV/AIDS ON ECONOMIC GROWTH IN SUB‐SAHARAN AFRICA1

This study investigates the hypothesis that HIV/AIDS epidemic slows down the pace of economic growth. We examine 41 Sub‐Saharan African countries by using the empirical growth equation in an augmented Solow model in which health capital serves as a determinant of human capital. Econometric analysis is based on panel data and covers the period 1997‐2005. We control for a variety of factors possibly correlated with HIV prevalence that might also influence economic growth. As a key result we prove that the epidemic has a significant negative effect on the growth rate of per capita GDP in Sub‐Saharan Africa.     

Adult Mortality,AIDS, and Fertility in Rural Malawi

The future course of fertility is a major determinant of economic development in many sub‐Saharan countries, so understanding how HIV/AIDS affects childbearing is of great interest. We show that fertility responds negatively to female mortality and positively to male mortality and that the overall fertility response is small. The negative effect of female mortality is in line with earlier studies that only focus on women and their infection and mortality risks, while the finding of a positive effect of adult‐male mortality is novel. One interpretation of this finding is that women who perceive a high risk of their husbands' or grown‐up sons' deaths are likely to want to have more children to ensure future support.     

HIV/AIDS Knowledge and Behaviour: Have Information Campaigns Reduced HIV Infection? The Case of Kenya*

Abstract: AIDS continues to have a devastating effect on developing countries, particularly in sub‐Saharan Africa. The lack of a proven effective vaccine to stop HIV transmission has led to much of public policy putting an emphasis on information campaigns in order to reduce HIV‐prevalence. In this paper we examine the impact of HIV/AIDS‐knowledge from two sides. First, we examine to what extent the campaigns have been successful at inducing the expected behavioural change with regards to HIV‐related attitudes. Second, we examine the impact of HIV/AIDS knowledge on HIV status. The basic policy issue can be expressed as follows: even if individuals have acquired sufficient and necessary information on the basic facts about AIDS, factors such as innate risk attitudes or cultural background could undermine the effects of the campaigns. Using the Kenya Demographic and Health Survey (2003) we elicit empirical evidence on the relation between declared HIV/AIDS‐knowledge, behavioural attitudes related to HIV/AIDS situations and the relation between knowledge and observed HIV‐status. Overall, our empirical findings suggest that information campaigns have been effective at equipping the adult population in Kenya with the required knowledge to avoid becoming HIV‐positive. However, when HIV‐status is measured objectively we find that the relation between correctly declared attitudes and actual behaviour is only statistically significant for females who have arrived into sexuality late enough to benefit from such campaigns: it is for these females that the impact of the information campaigns has been to statistically reduce the probability of becoming HIV positive, as intended. In the case of males we find that there is no statistical relation between either knowledge or timing of the information campaigns and a positive HIV status. Nevertheless, another important finding refers to the selection bias induced by males who are sampled randomly but decline to take the HIV test. The consequences of this bias are twofold; first, the estimated policy parameters for males should be interpreted with caution, but more importantly, estimating the population level HIV‐prevalence for Kenyan males based on the DHS implies underestimating the true and unknown prevalence rate. Our analysis controls for individual characteristics, selection bias and endogeneity effects, thus allowing us to make inferences for the full population and with regards to policy implementation.     

Health Expenditures and Health Outcomes in Africa*

Abstract: This paper provides econometric evidence linking African countries’ per capita total as well as government health expenditures and per capita income to two health outcomes: infant mortality and under‐five mortality. This relationship is examined using data from 47 African countries between 1999 and 2004. Health expenditures have a statistically significant negative effect on infant and under‐five mortality rates. The magnitude of our elasticity estimates are in consonance to those reported in the literature. For African countries, our results imply that total health expenditures (as well as the public component) are certainly important contributors to health outcomes. In addition, we find that both infant and under‐five mortality are positively and significantly associated with sub‐Saharan Africa. The reverse is true for North Africa. While ethnolinguistic fractionalization and HIV prevalence positively and significantly affect the health outcomes, higher numbers of physicians and female literacy significantly reduce these health outcomes. These results have important implications for attaining the targets envisioned by the Millennium Development Goals. The data implications are also discussed.     

Distance to Growing Markets and Sub‐Saharan African Exports*

Abstract: A typical person in sub‐Saharan Africa is a long way from world markets and is further from world markets now than in 1980. This partly reflects slower growth within Africa than for the world as a whole. Despite slower growth in Africa, African exports have become increasingly regionalized. By 2005, a country in Africa typically exported more than twice as much to a country in its own region as would be expected based on economic size and bilateral distance. This regionalization was not present in the early 1980s and has become stronger over time. We find evidence of positive neighborhood effects through exports, but sub‐Saharan countries benefit less from growth in their own region than this typical relationship indicates. Given the small share of exports destined to their neighbors, low‐income countries in sub‐Saharan Africa experience relatively modest export growth from growth in the region. These factors imply that African countries are unlikely to pull each other out of poverty and a regional focus may be less effective than a focus on countries outside of the region.     

Does China Transfer Productivity Enhancing Technology to Sub‐Saharan Africa? Evidence from Manufacturing Firms*

Abstract: This paper considers whether trade between China and sub‐Saharan Africa results in productivity‐enhancing technology transfers to sub‐Saharan African manufacturing firms. As trade flows between countries potentially results in interactions that lead to technological improvements in the production of goods and services, we parameterize the level of total factor productivity for African manufacturing firms as a function of foreign direct investment flow, and for the country in which it operates, trade openness with China, and its interaction with foreign direct investment. With micro‐level data on manufacturing firms in five sub‐Saharan African countries, we estimate the parameters of firm‐level production functions between 1992 and 2004. Our parameter estimates reveal that across the firms and countries in our sample, there is no relationship between productivity‐enhancing foreign direct investment and trade with China. In addition, increasing trade openness with China has no effect on the growth rate of total factor productivity. To the extent that total factor productivity and its growth is a crucial determinant of economic growth and living standards in the long run, our results suggest that increasing trade openness with China is not a long‐run source of higher living standards for sub‐Saharan Africa.     

The Global Financial Crisis and Sub‐Saharan Africa: The Effects of Slowing Private Capital Inflows on Growth*

Abstract: This paper uses the bias‐corrected least‐squares dummy variable (LSDV) estimator to examine the relationship between economic growth and four different types of private capital inflows (cross‐border bank lending, foreign direct investment (FDI), bonds flows and portfolio equity flows) on a sample of 15 selected sub‐Saharan African countries over the period 1980–2008. Our results show that FDI and cross‐border bank lending exert a significant and positive impact on sub‐Saharan Africa's growth, whereas portfolio equity flows and bonds flows have no growth impact. Our estimates suggest that a drop by 10 per cent in FDI inflows may lead to a 3 per cent decrease of income per capita growth in sub‐Saharan Africa, and a 10 per cent decrease in cross‐border bank lending may reduce growth by up to 1.5 per cent. Therefore, the global financial crisis is likely to have an important effect on sub‐Saharan Africa's growth through the private capital inflows channel.     

The effect of HIV on health care in sub‐Saharan Africa

This article is concerned with the hitherto neglected area of the effect of HIV on the delivery of health care in sub‐Saharan Africa. The task is hampered by a lack of usable data. In most countries there have been no sentinel HIV surveys, so we have no clear idea of the magnitude of the epidemic. However, it is certain that HIV will alter the demand for health care, and the supply and quality of services.

Demand will grow as infected adults and children seek care. Most HIV‐related illness is found in people who would not normally require care, and therefore creates additional demand. Demand for care will also be determined by the availability and accessibility of services. Ironically, the middle‐income countries may face higher bills, and in this sense the effect of the HIV epidemic may be worse in the more developed world.

The supply of services will be affected by increased morbidity and mortality among health care workers. This is already happening. The generous terms and conditions of service that most governments offer to workers in the public sector will make the problem worse.

HIV has served to improve the quality of health care in most of the developed world. Patients have sought to take control over their own care, and staff have been more rigorous in taking universal precautions. But in developing countries external aid often determines how health care is organised, and money spent on AIDS is diverted from other areas. This may also be true of local funding.

The effect of HIV on health care is lamentably under‐researched. This is particularly worrying as the effects of HIV will be felt first by the health care sector. The problem must be confronted urgently from the point of view of the suppliers of health care services, the users, and the policy‐makers.     

Aid and Poverty in Africa: Do Well‐being Measures Understate the Progress?

Abstract: In the last 15 years international aid donors to Africa have shifted their focus dramatically toward health and education; the share of social sector support in total aid rose from 33 per cent to 60 per cent from 1990–94 to 2000–2004 alone. If this aid has been effective, it is unlikely to be captured in GDP or income poverty figures. This paper uses the Demographic and Health Survey at multiple points in time to explore changes in well‐being in ten sub‐Saharan African countries. It compares the evolution of both assets and health which are considered as the two main dimensions of well‐being. These dimensions are simultaneously estimated using the structural equation models with latent variables that have been developed in the psychometric literature. The comparisons of well‐being across time in each country are based on the stochastic dominance analysis. The main results suggest that assets and health have improved during the last two decades in most of these countries. A decline in assets is observed for three countries while health deteriorates in two countries. The reduced poverty appears to be explained less by the aid than other factors in most cases.     

Impact of Public Investment on Private Investment in Sub‐Saharan Africa: Crowding In or Crowding Out?

This paper investigates the possible crowding‐in or crowding‐out effect of public investment on private investment in sub‐Saharan Africa. While this relationship has been theoretically and empirically studied in the literature, most studies used traditional panel fixed effects or Generalized Method of Moments estimators which can potentially lead to biased and inconsistent estimates. We employ heterogeneous parameter models, including the Mean Group, the Common Correlated Effects Mean Group Model, and the Augmented Mean Group estimators, to incorporate the possibility of slope heterogeneity and the presence of cross‐sectional dependence. Using a large sample of 44 sub‐Saharan African countries over the period 1960–2015, we find that on average public investment crowds in private investment in sub‐Saharan Africa. We also find that the impact differs between countries and is higher in countries with a strong private sector.     

Gains from Trade: Implications for Labour Market Adjustment and Poverty Reduction in Africa

Abstract: This paper reassesses the gains from trade for sub‐Saharan Africa, and draws their implications for labour market adjustment and poverty reduction. It reviews previous studies on multilateral liberalization, focusing on the findings from Computable General Equilibrium (CGE) models with relevance to African economies. The implications of these findings for poverty reduction are discussed. Our own CGE exercise supports the hypothesis that African countries cannot expect substantial gains from further multilateral liberalization. Moreover, given the sharp contraction of import‐competing sectors in response to trade liberalization in many African economies, coupled with insufficient compensation through labour market adjustments in other sectors, this study suggests that the ultimate impact on poverty reduction is likely to be small or even negative.     

RICE GREEN REVOLUTION IN ASIA AND ITS TRANSFERABILITY TO AFRICA: AN INTRODUCTION

Drawing on the experiences of Asian countries, we attempt to identify the transferability of Asian Green Revolution to sub‐Saharan Africa by examining whether there is a common set of factors affecting rice yields in the two regions. We have attempted to propose the strategy to realize a Green Revolution in sub‐Saharan Africa based on lessons learned from the comparative studies included in this special volume.     

Measurement of Capital Flight: Methodology and Results for Sub‐Saharan African Countries*

Abstract: This paper presents the methodology for the computation of capital flight and reports new estimates of the magnitude and timing of capital flight from 33 sub‐Saharan African countries from 1970 to 2004. Our methodology calculates capital flight as the residual difference between inflows and outflows of foreign exchange recorded in the balance of payments, with corrections for the magnitude of external borrowing, trade misinvoicing, and unrecorded remittances. We find that total capital flight from these countries in this period amounted to $443 billion (in 2004 dollars). With imputed interest earnings, the accumulated stock of flight capital amounted to $640 billion. These numbers exceed these countries’ external debts, which in 2004 amounted to $193 billion, indicating that sub‐Saharan Africa is a net creditor to the rest of the world.     

The External Debt‐Servicing Constraint and Public‐Expenditure Composition in Sub‐Saharan Africa

Abstract: In the light of the current global financial and economic crises, how would governments in sub‐Saharan Africa (SSA) allocate their budgets across sectors in response to a binding debt‐servicing constraint? Within a framework of public‐expenditure choice, the present paper estimates constraint‐consistent debt‐service ratios and employs them in a Seemingly Unrelated Regression involving a five‐year panel for up to 35 African countries over 1975–94, a period preceding the Highly Indebted Poor Countries (HIPC) initiatives. While observed debt service is found to be a poor predictor of expenditure allocation, constraining debt servicing shifts spending away from the social sector, with similar impacts on education and health. The implied partial elasticity of the sector's expenditure share with respect to debt is estimated at 1.5, the highest responsiveness by far among all the explanatory variables considered, including external aid. Thus, if the social sector is to be protected, sufficient debt relief for SSA countries should be pursued.     

The effects of female HIV/AIDS status on fertility and child health in Cambodia

Although Cambodia has been on a higher growth track, it still faces a great challenge in public health. Public health is closely related to the standard of living of the people and is indispensable for further economic development. This paper considers a serious public health problem, the HIV/AIDS epidemic in Cambodia. Specifically, it presents two testable hypotheses derived from a simple model and then empirically demonstrates these hypotheses, using data of more than 8000 women from the 2005 Cambodia Demographic and Health Survey (DHS). One hypothesis is the negative effect of female HIV on fertility, and the other is the positive effect of maternal HIV on child health status. Our estimation results are consistent with these hypotheses, implying that women infected with HIV tend to bear fewer children and their children are in better health.     

Introduction to Special Issue on: ‘Inequalities in the Least Developed Countries – Some Lessons from Africa’

This special issue comprises six papers analysing different dimensions of inequalities in African countries. Three papers deal with the trend in inequality in consumption in Mozambique, with multidimensional poverty in four sub‐Saharan countries, and with the relationship between living conditions and subjective well‐being in African countries. The other three are focused on gender issues and are focused on Mozambique, dealing with gender inequalities in the access to contract farming arrangements as well as to employment out of subsistence agriculture, or with the effect of women’s empowerment on children’s health. This introduction provides a short overview of how they contribute to a better understanding of inequalities in low‐income countries.     

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.     

Does Gender Inequality Reduce Growth in Sub‐Saharan African and Arab Countries?*

Abstract: This paper uses 1974 to 2001 panel data for 31 sub‐Saharan African and 10 Arab countries and Arellano–Bond estimations to empirically assess the impact on growth of an important indicator associated with MDG 3; namely the ratio of 15–24‐year‐old literate females to males. Our findings indicate that gender inequalities in literacy have a statistically significant negative effect that is robust to changes in the specification. In addition, it seems that gender inequality has a stronger effect on growth in Arab countries. Interestingly, we find that the interaction between openness to trade and gender inequality has a positive impact. This result suggests that trade‐induced growth may be accompanied by greater gender inequalities.     

Exiting from Fragility in Sub‐Saharan Africa: The Role of Fiscal Policies and Fiscal Institutions

This paper studies the role of fiscal policies and institutions in building resilience in sub‐Saharan African countries, focussing on 26 countries that were deemed fragile in the 1990s. We use a probabilistic framework together with GMM estimation to address endogeneity and reverse causality. We find that fiscal institutions and fiscal space, namely the capacity to raise tax revenue and contain current spending, as well as the quality of public expenditure, are significantly and robustly associated with building resilience. Similar conclusions arise from a qualitative study of 7 sub‐Saharan African countries in the sample that built resilience since the 1990s.     

Supply‐leading versus Demand‐following Hypothesis: Empirical Evidence from Three SSA Countries

Abstract: This study investigates empirically the direction of causality between financial development and economic growth in three sub‐Saharan African countries — Kenya, South Africa and Tanzania. The study seeks to answer one critical question: Does financial development in sub‐Saharan African countries exhibit a supply‐leading or demand‐following response? Using three proxies of financial development against real GDP per capita (a proxy for economic growth), the study finds that the direction of causality between financial development and economic growth is sensitive to the choice of measurement for financial development. In addition, the strength and clarity of the causality evidence is found to vary from country to country and over time. On balance, a demand‐following response is found to be stronger in Kenya and South Africa, whilst in Tanzania a supply‐leading response is found to be dominant. The study therefore recommends that for Kenya and South Africa the real sector of the economy should be developed further in order to sustain the development of the financial sector. However, for Tanzania, there is need for further development of the financial sector in order to make the economy more monetized.