Do Workers in Africa Get a Wage Premium if Employed in Firms Owned by Foreigners?

Do firms owned by foreigners pay higher wages than locally ownedfirms for apparently equivalent workers? Do such benefits accrueto all or only certain types of workers? This paper uses dataon individual wages in manufacturing industry for five Africancountries in the early 1990s to address these questions. Wepresent two main findings. First, foreign ownership is associatedwith a 20–40% increase in individual wages (conditionalon age, tenure and education) on average. This is halved to8–23% if we take into account the fact that foreign-ownedfirms are larger and locate in high-wage sectors and regions.Secondly, there is a tendency in some countries for more skilledworkers (using occupation and education categories) to benefitmore from foreign ownership than less skilled workers and thisconclusion holds after accounting for the size distributionof foreign firms. We discuss, but cannot directly test, theplausibility of two explanations for these findings: (i) foreign-ownedfirms employ technologies that are more skill-biased than technologiesin local firms and (ii) skilled workers in foreign firms aremore effective in rent-sharing than other workers. We contendthat these explanations may not be mutually exclusive and, hence,cannot be empirically distinguished.     

Interdisciplinary social science: a methodological analysis

Since the 1930's, interdisciplinarity has been advocated in the social sciences for the purpose of achieving more comprehensive explanations of observable social phenomena. However, the realization of this promising perspective has been rather poor. This article argues that two main causes of the failure to create interdisciplinary social science can be distinguished, i.e., methodological and theoretical problems. Methodological problems stem either from taking a reductionist approach towards interdisciplinarity, or by mistaking measurement issues for theoretical topics. Theoretical problems result from the poor state and rate of theory formation within psychology. The implications of these problems are that the validity and reliability of explanations of macro social phenomena, which are provided by disciplines such as sociology and macro economics, are seriously at stake.     

Optimal Currency Areas Scottish Economic Society/Royal Bank of Scotland Annual Lecture, 1999

Microeconomic efficiency and market transparency argue in favour of UK membership in EMU and for Scotland’s membership in the UK monetary union and also in EMU. UK seigniorage (government revenues from money issuance) would be boosted by EMU membership. Lender of last resort arrangements would not be substantially affected by UK membership in EMU. The UK is too small and too open to be an optimal currency area. The same point applies even more emphatically to Scotland. The ‘one‐size‐fits‐all’, ‘asymmetric shocks’ and ‘cyclical divergence’ objections to UK membership are based on the misapprehension that independent national monetary policy, and the associated nominal exchange rate flexibility, can be used effectively to offset or even neutralise asymmetric shocks. This ‘fine tuning delusion’ is compounded by a failure to understand that, under a high degree of international financial integration, market‐determined exchange rates are primarily a source of shocks and instability. Instead, opponents of UK membership in EMU view exchange rate flexibility as an effective buffer for adjusting to asymmetric shocks originating elsewhere. I know of no evidence that supports such an optimistic reading of what exchange rate flexibility can deliver under conditions of very high international financial capital mobility. The economic arguments for immediate UK membership in EMU, at an appropriate entry rate, are overwhelming. Monetary union raises important constitutional and political issues. It involves a further surrender of national sovereignty to a supranational institution, the ECB/ESCB. It is essential that this transfer of national sovereignty be perceived as legitimate by those affected by it. In addition, the citizens of the UK have become accustomed to a high standard of openness and accountability of their central bank since it gained operational independence in 1997. The ECB/ESCB must be held to the same high standard, and, while there are grounds for optimism, there still is some way to go there.     

Asset Policies During an Oil Windfall: Some Simple Analytics

Many developing countries are currently experiencing oil windfalls, whether due to discoveries or to price effects. Such windfalls pose a series of policy dilemmas. The literature has focused on one of these: the choice between using windfall savings for public capital formation and investment in foreign assets. There are good theoretical reasons for investing a substantial part of the windfall initially abroad: the return to investment would fall below the world interest rate if the windfall were to be used entirely for domestic investment. Investing abroad offers an escape from diminishing returns: foreign assets can be repatriated gradually and used for domestic investment. However, in practice the efficient balance between domestic and foreign assets is politically difficult to sustain. Also, even if politically feasible this strategy is inefficient due to the failure to expand the private capital stock (‘equipment’). The policy problem is that the government cannot undertake such investment itself and trying to induce private agents to undertake equipment investment by transferring part of the windfall to them is likely to fail as a result of information problems. We argue that domestic debt repayment solves this dilemma. It has the added advantage of making foreign asset accumulation difficult to reverse.     

Reciprocity in trade relations between South Africa and Europe

This article sets out the arguments, from South Africa's perspective, for a free trade agreement (FTA) with Europe. It argues against signing the Lome Convention. These arguments have more force if the right kind of FTA can be negotiated, because the greater the benefit South Africa derives from such an agreement, the more the credibility of domestic economic policies will be enhanced. Some requirements for the ‘right’ type of FTA are discussed.     

Spatial economic development in South Africa: an overview and evaluation of the platinum spatial development initiative

The Platinum Spatial Development Initiative (Platinum SDI), located in the North West province of South Africa, is examined in this article. The article commences with a historical synopsis of industrial policy and regional industrial development policy in South Africa. Thereafter the trade and industrial policies of the North West Provincial Government are discussed in the contexts of its economic development strategies ‘North West 2001’ from 1997, and the ‘North West Economic Development and Industrialisation Strategy’ from 2002. Various arguments for and against the viability of the Platinum SDI are put forward.     

Determinants of labour force participation in the North West province of South Africa

Based on data extracted from the 1995 October Household Survey of Statistics South Africa, this study has found that potential income is a major factor in labour force participation by African women in the North West province of South Africa. Other significant determinants of participation for both genders are age, education, region, marital status and relationship to the head of the household. The results imply that significant discrimination against African women still exists in the North West province, which partly explains the much lower participation rate for African women (64 per cent), compared with that of African men (86,5 per cent). The study supports the North West government's development strategy of developing human resources to eradicate poverty.     

Predicting technology adoption to improve research priority—setting

This paper presents an improved approach for predicting the speed and ceiling of technology adoption, which is a crucial information for research priority setting. In the models it is assumed that both the speed and ceiling of adoption depend on the perceived characteristics of technologies. Knowing the characteristics that have determined adoption in the past provides relevant information about the characteristics which will enable new technologies to be quickly and widely adopted in the future. Using a case study from Meru District in Kenya, it is shown that relative investment, relative risk and relative complexity significantly influenced the speed and ceiling of adoption of dairy technologies in the past. These empirical results are used to predict the speed and ceiling of adoption of potential new dairy technologies to be developed by the Dairy Cattle Research Programme (DCRP) of the Kenya Agricultural Research Institute (KARI). The approach is theoretically sound and based on empirical evidence. It clearly distinguishes promising technologies from less promising technologies and is transparent to participants in priority setting exercises. Allowing for the participation of all interest groups within the research system, the approach improves the quality of the assessment and hence the credibility of results.