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11. Explaining Wellbeing and Inequality in Cameroon: A Regression-Based Decomposition

Publication Date:
01-2020
Content Type:
Research Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
This study sets out to estimate the determinants of household economic wellbeing and to evaluate the relative contributions of regressed-income sources in explaining measured inequality. In particular, a regression-based decomposition approach informed by the Shapley value, the instrumental variables econometric method, and the 2007 Cameroon household consumption survey, was used. This approach provides a flexible way to accommodate variables in a multivariate context. The results indicate that the household stock of education, age, credit, being bilingual, radio and electricity influence wellbeing positively, while rural, land and dependency had a negative impact on wellbeing. Results also show that rural, credit, bilingualism, education, age, dependency and land, in that order, are the main contributors to measured income inequality, meanwhile, the constant term, media and electricity are inequality reducing. These findings have policy implications for the ongoing drive to scale down both inequality and poverty in Cameroon.
Topic:
Development, Economics, Poverty, Inequality, Economic Inequality, and Economic Policy
Political Geography:
Africa and Cameroon

12. The Exchange Rate Pass-Through to Inflation and its Implications for Monetary Policy in Cameroon and Kenya

Author:
Dongue Ndongo Patrick Revelli
Publication Date:
01-2020
Content Type:
Research Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
Understanding how domestic prices adjust to the exchange rate enables us to anticipate the effects on inflation and monetary policy responses. This study examines the extent of the exchange rate pass-through to the Consumer Price Index in Cameroon and Kenya over the 1991-2013 period. The results of its econometric analysis shows that the degree of the exchange rate pass-through is incomplete and varied between 0.18 and 0.58 over one year in Kenya, while it varied between 0.53 and 0.89 over the same period in Cameroon. For the long term, it was found to be equal to 1.06 in Kenya and to 0.28 in Cameroon. A structural VAR analysis using impulse-response functions supported the results for the short term but found a lower degree of pass-through for the exchange rate shocks: 0.3125 for Kenya and 0.4510 for Cameroon. It follows from these results that the exchange rate movements remain a potentially important source of inflation in the two countries. Variance decomposition shows that the contribution of the exchange rate shocks is modest in the case of Kenya but significant in that of Cameroon.
Topic:
Development, Economics, Monetary Policy, Exchange Rate Policy, Economic Policy, and Inflation
Political Geography:
Kenya, Africa, and Cameroon

13. The Impact of Regulations on Investment in Mobile Telephone Infrastructure in Southern African Development Community Countries

Author:
Albert Makochekanwa
Publication Date:
01-2020
Content Type:
Research Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
The main objective of the study was to investigate the impact of policy regulations on investments in mobile telecommunications network infrastructure in all the 15 member countries of the Southern African Development Community (SADC) region. The research employed panel data econometrics to achieve its stated objective. Estimated results shows that the coefficient of gross domestic product (GDP) per capita is positive and statistically significant, implying that an increase in this variable results in increase in demand and this in turn motivates infrastructure investment in mobile telephone. The coefficient on the previous level of mobile telephone infrastructure investment variable (Invkt-1) was found to be positive and statistically significant. This means that there is a systematic positive association between the previous level of mobile telephone infrastructure investment and the current. The coefficient of the main variable of interest representing mandatory unbundling (Regkt) was found to be positive and statistically significant. This implies that, overall, mandatory unbundling access regulation boost infrastructure investment in mobile telecommunication. Regression estimates shows that the coefficient on one of the variable of interest, political constraint (POLCON) has a negative and statistically significant impact on determining the level of mobile telephone infrastructure investment in SADC countries. Whilst this result is against expectations, one possible explanation may be presence of high level of rent seeking behaviour.
Topic:
Development, Economics, Regulation, Economic growth, and Economic Policy
Political Geography:
Africa and South Africa

14. COVID-19 and External Shock: Economic Impacts and Policy Options

Author:
Miguel Jaramillo and Hugo Nopo
Publication Date:
06-2020
Content Type:
Working Paper
Institution:
Group for the Analysis of Development (GRADE)
Abstract:
Latin America is currently suffering from two independent but related shocks: the impact of COVID-19 and the shock of commodity prices. Peru, we argue, is a case in which the strongest impact comes from the pandemic. Peru was the first country in Latin America to react and implement sanitary and economic measures against the coronavirus. The country has been in mandatory quarantine since Monday, March 16. This carries very important challenges for all economic actors. Global and national activity has suffered a sudden stop with direct implications for: (i) the income generating capacity of independent workers, (ii) the jobs of formal and informal and informal workers, and (iii) the survival of small, medium and large companies. In this note we consider the situation of Peruvian households in the face of the pandemic, exploring their vulnerabilities through an analysis of their main source of income generation: work. We also consider the situation of the companies that employ the workers under analysis. We present an overview of what the government’s main action have been so far and offer some recommendations.
Topic:
Economics, Political Economy, Economic Policy, Coronavirus, Pandemic, and COVID-19
Political Geography:
Latin America and Peru

15. Adapting to change: Time for climate resilience and a new adaptation strategy

Author:
Marco Giuli, Annika Hedberg, and Sofia López Piqueres
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
European Policy Centre
Abstract:
Even if we were to radically change our behaviours and economic policies now, it wouldn’t be enough to stop all of the economic, societal and environmental impacts of climate change. The EU and its member states need to start thinking seriously about how our societies will adapt to this new reality. Climate mitigation alone will not be enough to stop the dramatic effects of climate change and will have to go hand in hand with adaptation efforts. That is the sobering reality European decision- and policymakers need to keep in mind when developing climate action measures. Given the close interconnections between ecosystems, people and economies in a globalised world, there are strong reasons for EU member states to join forces, pool risks and cooperate across borders. This paper, therefore, calls on the EU to mainstream adaptation and shift its focus from reacting to disasters to a more proactive approach that prioritises prevention, risk reduction and resilience building. During the presentation of the new EU climate law yesterday, European Commission President von der Leyen hinted that member states would be required to develop and implement strategies that do just that.
Topic:
Climate Change, European Union, Economic Policy, and Resilience
Political Geography:
Europe

16. Dismantling the Myth of the Growth–Inequality Trade-Off

Author:
Mario Negre, Jose Cuesta, Ana Revenga, and Prescott J. Morley
Publication Date:
01-2019
Content Type:
Policy Brief
Institution:
German Development Institute (DIE)
Abstract:
Conventional economic wisdom has long maintained that there is a necessary trade-off between pursuit of the efficiency of a system and any attempts to improve equity between participants within that system. Economist Robert Lucas demonstrated the implications of this common economic axiom when he wrote: “Of the tendencies that are harmful to sound economics, the most seductive, and in my opinion the most poisonous, is to focus on questions of distribution [...] the potential for improving the lives of poor people by finding different ways of distributing current production is nothing compared to the apparently limitless potential of increasing production.” (Lucas, 2004) Indeed, many economists have suggested that too little inequality or too generous a distribution of benefits may undermine the individual’s incentive to work hard and take risks. Setting aside the harsh rhetoric used by Lucas, the practical and ethical acceptability of such a trade-off is debatable. Moreover, evidence from recent decades suggests that the trade-off itself is, in many cases, entirely avoidable. A large body of research has shown that improved competition and economic efficiency are indeed compatible with government efforts to address inequality and reduce poverty, as assessed in a World Bank report (World Bank, 2016). Contrary to another common belief about economic interventions, this research indicates that such policy interventions can be tailored to succeed in all countries and at all times; even low- and middle-income countries in times of economic crisis can successfully pursue policies to improve economic distribution, with negligible negative impacts on efficiency and, in many cases, even positive ones. Some examples of such pro-equity and pro-efficiency measures include those promoting early childhood development, universal health care, quality education, conditional cash transfers, rural infra-structure investment, and well-designed tax policy. Overall, four critical policy points stand out: 1. A trade-off is not inevitable. Policymakers do not need to give up on reducing inequality for the sake of growth. A good choice of policies can achieve both. 2. In the last two decades, research has generated substantive evidence about which policies work to foster growth and reduce inequalities. 3. Policies can redress the inequalities children are born into while fostering growth. But the wrong sets of policies can magnify inequalities early in life and thereafter. 4. All countries can, under most circumstances, implement policies that are both pro-equity and pro-efficiency.
Topic:
Governance, Inequality, Economic growth, and Economic Policy
Political Geography:
Germany and Global Focus

17. The Effects of US Sectoral Shocks through the World Input-Output Network

Author:
Minsoo Han
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
In this paper, I estimate the global effects of hypothetical 1% changes in US sectoral productivity. To do that, I formulate a multi-sector Armington trade model with import tariffs, trade in intermediate goods, sectoral heterogeneity, and input-output linkages. Because a closed form for changes in welfare is not available in the model, as opposed to Ossa (2015), I solve for equilibrium to conduct the counterfactual exercises. In particular, knowing that the gravity equations in this model are identical to Caliendo and Parro (2015) once we calibrate the trade elasticity and industry level productivity to the corresponding data, I modify their computation approach to estimate the counterfactual productivity changes. The model predicts that the primary channel through which the sectoral shocks affect welfare is terms of trade. I also find that both US productivity’s direct effect and effects through export prices are substantial for countries such as the US, Canada, Chile, and Mexico. On the other hand, changes in volume of trade are small and their directions of changes are also mixed across countries.
Topic:
International Trade and Finance, Economic Policy, and Trade
Political Geography:
North America and United States of America

18. The Effects of Technological Similarity and Diversity on Merger and Innovation

Author:
Gu Sang Kang
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper examines drivers of merger partner selection and impacts of those factors on post-merger innovation outcomes analyzing 1,432 merger transactions in U.S. ICT industries. Throughout the paper, technological similarity between merging firms and technological diversity of an individual firm are important factors affecting firms' merger partner choice. In order to show their impacts on merger partner selection, we use a two-sided matching model as a theoretical framework and employ a maximum score estimation as an empirical methodology. With these empirical strategies, our findings are summarized as follows. First, technological similarity between merging firms has positive effects on merger value creation. This implies that similar technologies between merging firms plays an important role in choosing their merger partners. Second, technological diversity of an individual firm increases expected merger values. This means that firms tend to choose their deal partners with diverse technologies for the purpose of maximizing their expected merger values. Lastly, we estimate post-merger innovation impacts for actual merger transactions. As a result, estimated merger values created by technological similarity and diversity increase the number of merged firms' patents after merger. This implies that expected merger values are realized through the channel of post-merger innovation outputs.
Topic:
Science and Technology, Business, Economic Policy, and Diversification
Political Geography:
South Korea, North America, and United States of America

19. Stakeholders’ Interest Relations in Korea’s Services Trade Liberalization: A Political Economy Analysis

Author:
June Dong Kim
Publication Date:
11-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
This paper seeks to analyze the major factors behind why each stakeholders in the legal, health, educational and audio-visual service sectors in Korea op-pose liberalization in a qualitative political economy context as well as to pro-vide alternative strategies for further liberalization in these four service sectors. In legal services, the foreign equity ceiling of 49 per cent for joint venture law firms may be lifted as long as the present regulation against the number of FLCs in a joint venture law firm exceeding the number of Korean lawyers is maintained. In health services, as a step-by-step approach, we can first con-sider a system where incorporated hospitals can be established and liquidated more freely by deregulating current limitations placed on the disposal of re-maining properties, while an overly distribution of dividends is restrained. In educational services, in order to deregulate limitations regarding the disposal of remaining properties, it will be necessary to enhance the transparency of management and operation of private schools. In this regard, allowing school foundations to take the form of a limited liability company could be considered, since they would then become subject to external financial audit. In audio-visual services, it will be necessary to improve monitoring and im-plementation of intellectual property rights as well as competition policy when considering further liberalization. The major factors compelling each stakeholder in the legal, health, educational and audio-visual services to oppose further liberalization can be summarized as a general mindset towards uniform equity and control, cultural factors pre-venting discussion on rational alternatives, insufficient government budget for universal services, lack of administrative capacity in policy implementation and monitoring, absence of a proper system to evaluate the quality of ser-vices, asymmetry of information, and persistence of acquired rents. In order to correctly identify and understand the nature of problems, the highest priority should be placed on reducing the mistrust among the con-stituents. This is because mistrust among the constituents acts as the most important impediment when attempting value-creating negotiation strategies among each of the stakeholders. Meanwhile, to build trust among all constit-uents, free flow of information works as an important factor. Therefore, the problems of mistrust and lack of free flow of information are the most important impediments to improve those constraints that were analyzed in the selected service sectors. In addition, they are interlinked with each other, so that dealing with these problems simultaneously is a rational solution. In order to accomplish this, it is utmost important to develop the capability of each constituent to allow them to interpret specific pieces of information without distortion. In this regard, upgrading research and educa-tion of economics also becomes imperative.
Topic:
Political Economy, Law, Economic Policy, and Trade Liberalization
Political Geography:
Asia and South Korea

20. Institutional Quality, Trade Costs and Comparative Advantage

Author:
Sangkyom Kim and Soon Chan Park
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
Earlier works derive empirical implications that institutional quality is very influential as a source of comparative advantage in industries requiring relationship-specific investment from the supplier. However, as earlier studies focus on investigating the impact of institution on the efficiency of the producer, only the exporter’s institution is considered. In contrast, we attempt to identify the impacts of the quality of institution, of both exporters and importers, on trade costs, that are different across country-pairs. To check the problem of measuring trade costs, we use two alternative measures of trade costs, i.e. CIF/FOB ratio and the relative measure of trade costs proposed by Novy (2013). Using the Eora global supply chain database covering 187 countries for 11 primary and manufacturing industries and four years, 2000, 2005, 2010 and 2015, we calculate a CIF/FOB ratio and the relative trade costs suggested by Novy (2013) which are used as a proxy variable for trade costs. At the country level, we find that the institutional quality of exporter and importer is negatively associated with trade costs and trade costs increase as disparity between two countries’ institutional quality increases. At the country-industry level, we find that a country-pair with better legal institution has lower trade costs in industries for which a hold-up problem is important. This result is robust to the alternative measure of trade costs suggested by Novy (2013). However, an analysis on the impact of institutional differences on trade costs yields mixed results. Therefore we do not conclude that the similarity of institutional quality between two countries is associated with lower bilateral trade costs.
Topic:
Economic Policy, Trade, and Industry
Political Geography:
Global Focus