Hélène Maisonnave

Analysing Job Creation Effects of Scaling Up Infrastructure Spending in South Africa

ABSTRACT In a first for South Africa, this article draws on literature on infrastructure productivity to model dynamic economy-wide employment impacts of infrastructure investment funded with different fiscal tools. Using a dynamic computable general equilibrium model, the South African investment plan is modelled, given the infrastructure externality. Alternative fiscal scenarios to finance the policy are modelled in the article. In the long run, unemployment decreases for all types of workers under one of the scenarios. In the short run, only elementary occupation workers benefit from a decrease in unemployment; for the rest, unemployment rises.

Fiscal Space and Public Spending on Children in Burkina Faso

Despite high growth rates in recent decades, Burkina Faso is still a poor country. The government acknowledges the need for a stronger commitment to reach the Millennium Development Goals (MDGs), particularly regarding the reduction of poverty. At the same time, the Burkinabe budget deficit has grown in recent years in response to various crises which have hit the country. There are strong pressures to rapidly reduce this budget deficit, but there are active concerns about how this will be achieved. The country thus faces difficult choices: how to ensure better living conditions for children, attain the millennium goals and ensure they have a better future in the present budgetary context?To answer this question, three policy interventions were identified: (i) an increase in education spending, (ii) a school fees subsidy and (iii) a cash transfer to households with children under the age of five. The same total amount is injected into the economy in each of the three cases, facilitating comparison between the three scenarios. The discussions also made it possible to identify the three financing mechanisms that appear most realistic: (i) a reduction in subsidies, (ii) an increase in the indirect tax collection rate and (iii) an extension of the timeframe to reduce the public deficit to ten years rather than five.The results indicate that increased public education spending helps raise school participation and pass rates, thus increasing the supply and education level of skilled workers, leading to a reduced incidence and depth of both monetary and caloric poverty.School fees subsidies have more differentiated effects on education: they promote children’s entry into school to a greater degree, but are less effective at inducing them to pursue their studies. Finally, the supply of skilled workers increases slightly, but their average level of education is lower than in the reference scenario. This type of intervention has a beneficial impact on poverty, greater than under increased public education spending.Cash transfers have a limited impact on educational behaviour, and thus on the supply of skilled workers, but substantially reduce the incidence and depth of poverty.The results are qualitatively similar under each financing approach. In sum, if the objective is to achieve improved education and economic performance, the best intervention appears to be to focus on increased public education spending. However, if reducing child poverty is prioritized, it is cash transfers to families that appear more suitable. Regardless of the intervention considered, the most suitable financing mechanism appears to be a temporary increase in the public deficit, because it is accompanied by a smaller negative effect on the quality of life of the most destitute.

The Impact of the International Economic Crisis in South Africa

A dynamic computable general equilibrium model based on the PEP standard model developed by Decaluwe et al. (2009) is used to evaluate the impacts of the international crisis on the South African economy. However, we have changed some assumptions in order to better represent South African specificities. A major innovation in this regard is the modelling of unemployment and the influence of labour unions on the labour market. Two scenarios encompassing a severe and moderate recession are run. The effects of the crisis on the economy are really quite harsh, even in the moderate recession scenario, both in the short run and the long run. Indeed, the decrease of world prices combined with the drop of world demand lead to a decrease in production for many sectors with consequent laying off of workers. The impact on institutions is also worrying: agents see their income as well as their savings decreasing. The huge drop in firms’ savings has a dire impact on total investment while the huge negative impact on government accounts of protracted slow global growth imply tight public budgets for some time to come. Thus, some gains made by the government prior to the crisis may have been reversed by the economic crisis. It is apparent from the results that the impact of the crisis will drag into the long run with the situation still below what it would have been in the absence of a crisis until 2015.

Does South African Affirmative Action Policy Reduce Poverty? A CGE Analysis

This paper presents a computable general equilibrium model (CGEM) able to measure the impacts of the affirmative action policy set up in South Africa. In order to decrease inequalities inherited from the former regime, the government encourages firms to employ Historically Disadvantaged Persons (HDP). Through this study, we evaluate the impact of this policy on employment, poverty and inequality. To evaluate impacts on poverty and inequality, we use a CGE Top Down approach. The paper analyses two scenarios; the first one deals with the impact of affirmative action on skilled jobs. The second scenario adds to the previous by including semi skilled workers in the simulation. Both of these scenarios show a deep decrease in unemployment as well as a fall of poverty for each population groups.

An integrated model for evaluating investments in cultural heritage tourism in the Dominican Republic

In the Dominican Republic, tourism represents a significant share of growth domestic product. Improving and increasing cultural heritage tourism opportunities offer potential for tourism product diversification which can expand the visitor base, increase tourism expenditure, and ultimately contribute to enhanced economic growth and development for tourism dependent economies. This study presents an integrated economic bottom-up model for tourism investment analysis. The framework links simulation models and valuation approaches from different economic research fields including economy-wide modelling, time series modelling, stated preference approaches, and net present value analysis. Applied to the analysis of an investment for enhancing cultural heritage tourism in the Colonial City of Santo Domingo, the integrated model generates valuable insights on the transmission pathways through which investment in cultural heritage tourism can accelerate economic growth, generate employment, and raise incomes. The framework presented here can be developed and applied to other country contexts where decision makers have similar interests in investing and diversifying the tourism opportunities available to visitors.

The Economy-Wide Impacts of the South African Child Support Grant: A Micro-Simulation-Computable General Equilibrium Analysis

We examine the economy-wide impact of the child support grant (CSG) on the South African economy using a bottom-up/top-down approach. This allows us to estimate the potential effects on households’ welfare and on the economy following a change in the CSG. Three simulations are presented, in simulation 1 the value of the CSG is increased by 20%; in simulation 2 the number of beneficiaries among the eligible children is increased by two million and simulation 3 combines these two. A positive link between the CSG and the probability of participating in the labour market is found. The positive impacts on the labour market, together with the increase in the transfers received by households, results in an increase in their income. Poverty decreases in comparison with the base year for the whole population and for children. Finally, we can conclude that simulation 1 is the most cost effective of the policies.

Economywide and Distributional Impacts of Water Resources Development in the Coast Region of Kenya: Implications for Water Policy and Operations

A water-focused computable general equilibrium and microsimulation models were applied to analyze the economywide and distributional impacts of the multipurpose Mwache dam investment in the coast region of Kenya. The results show that the dam is likely to contribute to the regional economic growth with highest results under the combined allocation scenario of 80 percent for domestic users and nonagricultural economic sectors and 20 percent for irrigation purposes. In the coast region, water allocation to agriculture is key for inclusive growth and poverty reduction. With irrigation water, increased production of maize, pulses, oil crops, fruits, and vegetables in the hitherto drought-prone region fuels agricultural productivity growth that benefits the regional and national economies. Thus, allocation of water to irrigation can have considerable effects on food availability and food and nutritional security in the region, which suffers from persistent food deficits. Provision of domestic water supply is necessary but not sufficient for overcoming extreme poverty. Increased water availability benefits all industries operating in the coast region, in particular, those relatively more intensive in water.

The Economic Benefits of Investing in Cultural Tourism: Evidence from the Colonial City of Santo Domingo

This paper draws together quantitative methodologies from environmental and tourism economics to develop a framework for evaluating investments in cultural tourism. Indirect and induced benefits of investment in cultural tourism contribute to the overall returns on investment and not including these considerations can result in a nontrivial undervaluation of returns. To illustrate the approach, the framework is applied to a hypothetical US

Does climate policy make the EU economy more resilient to oil price rises? A CGE analysis

90 million investment in cultural tourism in the Colonial City of Santo Domingo in the Dominican Republic. While there is an opportunity cost of allocating resources to cultural tourism, this paper demonstrates the costs of not doing so by considering a disinvestment in cultural tourism. Results of the analysisshow greater economic growth and household well-being with increased investment, with disinvestment generating significant negative consequences for economic output, employmentand terms of trade.