Bichaka Fayissa

Diversification and Livelihood Sustainability in a Semi-Arid Environment: A Case Study from Southern Ethiopia

Abstract This paper examines the recently growing adoption of non-pastoral livelihood strategies among the Borana pastoralists in southern Ethiopia. A large portion of the current non-pastoral participation is in petty and natural resource-based activities. Pastoral and crop production functions are estimated using the Cobb-Douglas model to analyse the economic rationale behind the growing pastoralist shift to cultivation and other non-pastoral activities. The low marginal return to labour in traditional pastoralism suggests the existence of surplus labour that can gainfully be transferred to non-pastoral activities. An examination of the pastoralist activity choices reveals that the younger households with literacy and more exposure to the exchange system display a more diversified income portfolio preference. The findings underscore the importance of human capital investment and related support services for improving the pastoralist capacity to manage risk through welfare-enhancing diversified income portfolio adoption.

The Impact of Remittances on Economic Growth and Development in Africa

The perceived factors of economic growth in developing economies have ranged from surplus labor to capital investment and technological change, trade, foreign aid, foreign direct investment, investment in human capital, increasing returns from investment in new ideas, and research and development. Other researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, and voice and accountability on economic growth and development. Despite the increasing importance of remittances in total international capital flows, however, the relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on economic growth within the conventional neoclassical growth framework using panel data spanning from 1980 to 2004 for 36 African countries. We find that remittances positively impact economic growth by providing an alternative way to finance investment and helping to overcome liquidity constraints.

Estimating a health production function for Sub-Saharan Africa (SSA)

The paper estimates a health production function for Sub-Saharan Africa based on the Grossman (1972) theoretical model that treats social, economic, and environmental factors as inputs of the production system. In estimating this function, socioeconomic and environmental factors such as income per capita, illiteracy rate, food availability, ratio of health expenditure to GDP, urbanization rate, and carbon dioxide emission per worker are specified as determinants of health status. The parameters of the function are estimated by one-way and two-way fixed and random effects model of panel data analyses. The results of the two-way random effect model suggest that an increase in income per capita, a decrease in illiteracy rate, and an increase in food availability are strongly associated with an improvement in life expectancy at birth. Overall, the results imply that a health policy which may focus on the provision of health services, family planning programs, and emergency aids to the exclusion of other socioeconomic and environmental aspects may do little to improve the current health status of the region.

Foreign aid and the economic growth of developing countries (LDCs): Further evidence

The objectives of this article are to revisit the critical role that foreign aid presently plays in the economic growth of the LDCs and to examine the nature of its utilization in those countries which heavily rely on foreign aid. Other sources of economic growth such as capital (physical and human capital), raw labor, technological changes, and the degree of political and civil liberties will also be considered. Using average cross-sectional data for eighty countries over the 1971–1990 period, the study shows that foreign aid has a statistically positive effect on economic growth in developing countries. Lack of political and civil liberties is found to have a negative, but statistically marginal impact on economic growth. A policy implication which may be drawn from the study is that foreign capital inflow can have a beneficial effect by supplementing domestic savings rather than replacing them.

Research Note: Tourism and Economic Growth in Latin American Countries – Further Empirical Evidence:

Using panel data that span from 1990 to 2005, the authors investigate the impact of tourism on the economic growth of 18 heterogeneous Latin American countries within the framework of the conventional neoclassical growth model. Results from the empirical models show that revenues from the tourism industry contribute positively to both the current level and the growth rate of the per capita GDP of the countries in the region, as do investments in physical and human capital. The findings imply that Latin American economies may enhance their economic growth in the short run by strengthening their tourism industries strategically, while not neglecting the traditional sources of economic growth.

The urban subsistence labor force: Toward a policy-oriented and empirically accessible taxonomy

Abstract This paper responds to recent arguments that the informal sector is an extremely fuzzy concept and that the formal/informal dichotomy does not serve as a useful description of welfare or income. A taxonomic system is proposed that is intended to supplement but not replace the long-accepted formal/informal system. By focusing on labor force units rather than firms, the proposed system provides an analytical category that is equivalent to the urban working poor and thus has significant advantages for the study of such topics as income distribution, rural-urban migration, and poverty.

The determinants of infant and child mortality in developing countries: The case of Sub-Sahara Africa

The objectives of this paper are to: a) examine the determinants of the variations in the crude birth rates (CBR) mortality rates for the less than one year old infants (IMR) and for the less than five-year old children (CMR) b) account for the possible endogeneity or feed-back effects between the crude birth rate (CBR) and child mortality rate (CMR) c) draw conclusions based on the results and d) make some policy recommendations for reducing the relatively high child mortality rate in Sub-Saharan Africa. In particular the study will explore the effects of economic (income per capita-IPC government expenditures on health and nutrition--PHL) demographic (crude birth rate-CBR female education-EDF female labor force participation rate-FLR) health care aspects (access to safe water-WTR immunization-IMZ under weight births-UWB malnutrition-MLN) and structural adjustment factors (Debt/GDP Ratio-DGR) on CBR IMR and CMR respectively. Initially single multiple regressions are run to identify factors directly influencing infant and child mortality rates and the crude birth rates. Recognizing the endogeniety of the crude birth rate and infant or child mortality rate a simultaneous equations model is constructed and estimated by the Two Stage Least Squares Method (2SLS). The test is conducted using cross-section data for thirty-four Sub Sahara African countries for which complete data are available. Based on the results from the 2SLS estimation the indirect effects (multiplier effects of elasticities) of the exogenous policy variables on the endogenous variables are computed. This exercise is particularly important for evaluating the responsiveness of infant or child mortality rates to the various exogenous policy instruments. The paper is organized as follows. Section two gives the theoretical and empirical underpinnings of the crude birth rate (CBR) infant and child mortality rate (IMR and CMR) models. The OLS results and interpretations of the single equation models are provided in section three. The results and interpretations of the endogenous variables (CBR and CMR) and presented in section four. In section five we compute the elasticities of the CBR and CMR to infer their sensitivity to changes in the various policy instruments. Based on the results the paper draws some conclusions and makes some policy recommendations for reducing infant child mortality rates in Sub--Sahara Africa in section six. (excerpt)

Inflation, money, interest rate, exchange rate, and casuality: the case of Egypt, Morocco, and Tunisia

This study provides further evidence of the inflationary efects of the rates of growth of money supply, gross domestic product, efective exchange rate, and imported inflation for Egypt, Morocco, and Tunisia using quarterly data from 1964 to 1990. In addition, it examines the Granger causality between inflation and money supply as well as between inflation and the real exchange rate in the countries under consideration. Most of the results are consistent with extant theory and empirical evidence.

The Impact of Governance on Economic Growth in Africa

Sub-Sahara African countries have had a checkered past when it comes to good governance and institutions. Increasingly, economists and policy makers are recognizing the importance of governance and institutions for economic growth and development. The New Partnership for Africa’s Development (NEPAD) has four main goals: eradicating poverty, promoting sustainable growth and development, integrating Africa into the world’s economy, and accelerating the empowerment of women. Using fixed and random effects, and Arellano-Bond models, this paper investigates the role of governance in explaining the sub-optimal economic growth performance of African economies. Our results suggest that good governance or lack thereof, contributes to the differences in growth of African countries. Furthermore, our results indicate that the role of governance on economic growth depends on the level of income. In a nutshell, our results demonstrate that without the establishment and maintenance of good governance, achieving the goals of NEPAD will be hampered in Africa.

The impact of exchange rate changes on investment in research and development

Abstract Panel data on 360 U.S. manufacturing firms over the years 1975 to 1987 are used to identify the response of R&D spending to exchange rate changes. Only firms in industries with average R&D spending of at least 3 percent of sales revenue react to an exchange rate appreciation with increased R&D spending. Firms in industries with lower levels of R&D intensity do not. This finding can be interpreted to mean that only R&D intensive firms react to an increase in competitive pressure with more R&D effort.