African Journal of Economic Review

The Moderating Effect of Gender Equality in Reproductive health on the Relationship between Financial Development and Poverty Reduction in sub-Saharan Africa: A Quantile Regression Approach.

Deusdedit Lemnge — 2024-06-14

This study investigates the potential moderating effect of gender equality in reproductive health on the relationship between financial development and poverty reduction in 36 sub-Sahara African countries from 2000 to 2022, using the Quantile Method of Moments with fixed effects to address endogeneity issues and outliers. The study employs the poverty headcount ratio and poverty gap ratio as poverty indicators while controlling for inflation rate, economic growth, education, income distribution, and government expenditure using data from world development indicators, UNDP, and IMF data banks. The results show that financial development significantly contributes to poverty reduction in sub-Saharan Africa, but this contribution declines as poverty severity increases. Moreover, reduced challenges in women's reproductive health play a vital role in decreasing poverty, and integrating gender equality in reproductive health with financial development improves the relationship between financial development and poverty reduction. The study also concludes that poverty reduction initiatives are more effective when financial development strategies are part of a broader approach that includes women's reproductive health, economic growth, and resource equality.

The Impact of Sludge Manure Adoption on Crop Yields: Evidence from a Propensity Score Matching Approach.

Jordan Paul Semwanga — 2024-06-14

This study examines the impact of sludge manure adoption on household farm production, focusing on matooke (bananas), maize, beans, sweet potatoes, coffee and cassava. We employ a propensity score matching methodology and estimate the average treatment effect on the treated (ATT), and we report the results from the nearest neighbor algorithm and test for robustness using the kernel algorithm. The study uses household survey data collected from the central districts of Uganda between January and February 2023. Our key findings indicate increased and significant yields of bananas, maize, coffee and cassava. These results are similar to those of different estimation algorithms. From a policy perspective, our results suggest that the design of agricultural productivity enhancing programmes, especially for farm households, requires leveraging organic technologies to promote agricultural production.

Estimating The Direct Effect of Economic Growth on Income Inequality in Sub-Saharan Africa: The Moderating Role of Natural Resource Governance.

Sali Oumarou — 2024-06-14

We examine the effect of natural resource governance on the direct impact of economic growth on income inequality in Sub-Saharan African countries. We use data from a panel of 40 of these countries, in which natural resource revenues represent at least 5% of GDP over the period 2001–2020. Dynamic panel data models are estimated using the System Generalized Method of Moments technique. Estimation yields two important results. First, economic growth is found to be increasing income inequality in these panel countries, whatever the income inequality measure is considered. Second, natural resource governance improvement, captured by the Extractive Industries Transparency Initiative (EITI)_Engagement and by the EITI_Compliance, is found to be directly reducing income inequality and to be reducing the income inequality increasing effect of economic growth in these countries. We conclude the paper by recommending that SSA-rich natural resource-rich countries, in search of justice, peace, and development, should engage and conform to EITI requirements.

The Impact of Conditional Cash Transfers and Public Works Programs on Household Welfare in Rural Tanzania

Fides Emmanuel — 2024-06-14

Both Public Works (PWs) and Conditional Cash Transfers (CCTs) programs have been implemented to support poor households in enhancing food security, protecting physical assets, and boosting resilience against shocks. However, ownership of valuable assets like improved housing, durables and livestock remains low among rural households in Tanzania. Evidence shows; that households without assets experience a decline in welfare and are at risk of falling into lower economic status. This study aims to assess the impact of integrated CCTs and PWs on asset holdings among households. The asset index was calculated using Principal Component Analysis (PCA) on cross-sectional data collected from 357 households (both treated and control) to determine household socioeconomic status and the Propensity Score Matching (PSM) technique was employed for impact evaluation. The results indicated that integrated CCTs and PWs contributed to improve asset accumulation by households. About 52% beneficiaries lives under improved iron roofed houses, owning 2 more goats and 3 more chicken compared to non-beneficiaries. Additionally, spending habits economics activities played a significant role in asset accumulation. The policy implications are to consider other cash transfer programs in other areas that have the potential to reduce poverty by providing direct financial assistance to vulnerable populations, leading to improved well-being and economic stability.

Drivers of Participation in Smallholders Banana Contract Farming in Kenya.

Michael Murigi — 2024-06-14

Smallholder banana farmers in Kenya face declining farm productivity and low market prices due to a fragmented, broker-dominated market. While the Kenya National Banana Development Strategy promotes contract farming as a potential solution, farmer participation remains surprisingly low. This study investigates the factors influencing smallholder participation in banana contract farming in Kenya. Employing a heteroskedastic probit model with robust standard errors to assess the drivers of participation in smallholder banana contract farming in Kenya, we identify key drivers such as household head education, credit access, cooperative membership, irrigation, and banana farm size. Based on these findings, we recommend policy interventions focusing on: Enhanced farmer extension services and technical assistance, facilitated credit access, cooperative development, investment in irrigation, and incentives for contract farming companies. By addressing these critical factors, policymakers can encourage wider smallholder participation in banana contract farming, unlocking its potential to improve livelihoods and contribute to sustainable agricultural development in Kenya.

Effect of Tax Avoidance on Cost of Capital in Nigeria

Sebil Olalekan Oshota — 2024-06-14

The study explored the relationship between tax avoidance and the cost of capital among publicly listed firms in Nigeria from 2010 to 2022. Using a simple random sampling technique, the sample included 30 firms across five sectors. Secondary data were sourced from annual reports of the selected firms and fact books from the Nigerian Stock Exchange (NSE). The cost of capital, comprising cost of equity and cost of debt, was analyzed with tax avoidance measured by the firm's cash effective tax rate. Control variables included leverage, return on assets, return on equity, firm size, and board size. A panel fixed effects panel regression analysis, selected after a Hausman pre-test, was employed alongside "Driscoll-Kraay standard errors" to address heteroscedasticity and autocorrelation issues. Results from the panel fixed effects analysis indicated that tax avoidance significantly and positively affects both the cost of equity and the cost of debt, highlighting tax avoidance as a key factor in firms' financing decisions and investors' choices. Further analysis using system GMM two-step estimators confirmed the panel fixed effect results, underscoring their robustness and revealing a bidirectional relationship between tax avoidance and cost of debt, suggesting reverse causality. To address these implications, policymakers are urged to implement regulatory measures encouraging voluntary tax compliance and clear tax law interpretations to curb aggressive tax avoidance, thereby reducing firms' cost of capital. Additionally, firms should enhance transparency by disclosing operational details to shareholders, fostering investor confidence and influencing their perceptions of risk and the associated cost of capital.

Dynamics and Trends of Mining in Tanzania: A Cointegration Approach, 1966-2023.

Godius Kahyarara — 2024-06-14

This paper examines trends and dynamics of the Mining sector of Tanzania over a time span of 100 years. To do so, econometrics analysis is used to estimate cointegration model for trends within the span of time from 1966 till 2023. Qualitative analysis is also undertaken and empirical findings confirm five distinct regimes of mining sector performance since 1898 namely; the gold boom from 1898 till 1950, diamond boom from 1950 up to 1966, drastic fall from 1966 till 1997, recovery from 1997 up to 2010 and gold boom from 2010 to date. Tracing from 2000 when Vision 2025 was adopted, paper estimates show that the mining sector performance has been extraordinary from 1 percent in 1997 to 10 percent share of GDP by 2023 and export contribution has increased from US dollar 26 million in 1997 to 2.9 billion by 2023. Legal, regulatory and institutional frameworks at sectoral and macro level substantially influence the observed performance. The paper shows that the error correction term is correctly signed and statistically significant and, the coefficient of minerals export is statistically significant such that a 1 percent increase in mineral export will lead to a 0. 43 percentage increase of total export in the long run, with 77 percent speed of convergence to equilibrium. In terms of contribution to GDP, the results show that 1 percent increase in minerals production lead to 0.16 percent increase of GDP. Further analysis of the paper demonstrates high intensity of the correlation, integration and linkages effects between mining sector with other sectors particularly manufacturing. Thus, mining sector generally has potential to maximize gains from economic and social development whereas discovery of huge deposits of rare earth elements in Tanzania and availability of wide range of industrial mineral in nearly all regions of Tanzania have a potential of becoming a new backbone of Tanzania and enable manufacturing contribution over 30 percent of GDP.