African Journal of Economic Review

Testing Gender and Race Non-linear Unemployment Invariance Hypothesis in South Africa: Evidence from Threshold Regression

Isiaka Akande Raifu — 2025-03-06

This study employed South African data from 2008Q1 to 2021Q1 and a combination of OLS, FMOLS and threshold regression to test the validity of the existence or absence of a nonlinear Unemployment Invariance Hypothesis across race and gender, with the goal of determining whether the relationship between the unemployment rate and labour force participation rate is dependent on the unemployment regimes. The threshold regression results revealed that the relationship between unemployment and labour force participation varies by regimes. In other words, the impact of unemployment on labour force participation varies by gender and race and depends on the state of unemployment. In most cases, the discouraged worker hypothesis dominates, particularly at high unemployment rates (beyond predicted thresholds). This indicates that the relationship between the labour force participation rate and unemployment across different categories is dependent on the characteristics of the South African labour market, which is marked by structural and cyclical unemployment with structural inequities across races, sectors and groups. As a result, a persistently high unemployment rate in the South African labour market may lead to lower labour force participation, exacerbating the existing unemployment problem and eventually leading to permanent unemployment. Given our findings, the South African government should pursue substantial labour reforms that include educating and retraining existing unemployed workers, as well as creating an enabling environment conducive to job creation.

Willingness to Pay for Reliable Electricity Supply in Nigeria: Evidence from Residential Consumers

Iyabo Olanrele — 2025-03-06

The problem of unreliable electricity supply is a barrier to good quality of life and economic productivity. Therefore, this study examines the drivers of residential consumers' willingness to pay (WTP) for improved electricity supply and the average monetary value they can accommodate on their current tariff for 70 percent improvement. The study used a 2022 contingent valuation household survey of 215 samples in Ekiti State, Nigeria. The analysis adopts a logistic regression to determine the drivers of household WTP for the improved electricity supply using a combination of socioeconomic characteristics, electricity supply profile, and maximum tariff bid. Household characteristics such as education, household size, income, expenditure on backup generator fuel, and bid are the likely determinants of WTP for reliable electricity supply. The derivation of mean WTP from the logistic estimation shows that the residential consumers could pay N164.81/kWh (~US$ 0.37/ kWh) for a 70 percent improved electricity supply. The mean willingness to pay represents an extra N108.93kWh (~U$0.25/kWh) over the current tariff and an increment of about 194.94 percent per kilowatt of electricity. The higher premium is acceptable by 85 percent of the households surveyed. These findings provide evidence about the WTP for reliable electricity supply and its determination, which is vital for policy direction on future tariff setting in Nigeria. The study recommends that the electricity sector regulator stipulate a minimum investment requirement for improved electricity supply.

Dynamic and Asymmetric Influence of Financial Credit, Economic Growth and Technological Innovation on the Ecological Footprint in Sub-Saharan Africa

Mwoya Byaro — 2025-03-06

We used a machine learning technique (Kernel Regularized Least Squares, KRLS) to investigate the dynamic and asymmetric influence of financial credit, economic growth and technological innovation (i.e. trade marks) on ecological footprints in 19 selected sub-Saharan African (SSA) countries from 2000 to 2022. The findings show that financial credit, economic growth and technological innovation have asymmetric/non-linear influence on the ecological footprint. A 1% increase in financial credit (domestic credits to the private sector) reduces the ecological footprint by 0.14%. In turn, financial credits decrease the ecological footprint in the 10th to 80th percentiles while increasing it in the 90th percentile. This suggests that financial credit reduces the ecological footprint and a larger increase in financial credit increases it. Economic growth reduces the ecological footprint by 0.003% at the 10th percentile and increases it at the 20th to 90th percentiles. This implies that an increase in economic growth initially reduces the ecological footprint, and a greater increase in economic growth increases the ecological footprint. The findings reveal that technological innovation reduces the ecological footprint in the 10th to 40th percentiles while increasing it in the 50th to 90th percentiles. This suggests that technological innovation initially reduces the ecological footprint, and a steady increase in technological innovation greatly increases the ecological footprint in SSA. The results are robust, supported by Bayesian estimates. To tackle the ecological footprint challenges in SSA, policy implications should introduce green technologies as a means to mitigate the impact of economic growth and financial credit on the ecological footprint in SSA, ultimately promoting climate change mitigation and achieving sustainable development goals by 2030.

The Monetary Approach to Exchange Rates in the East African Community

Khatibu Kazungu — 2025-03-06

This study investigates the monetary model of exchange rates determination using a panel framework for five East African countries—Kenya, Uganda, Tanzania, Rwanda, and Burundi—over the period 1995–2023. The analysis follows a systematic five-step methodology: cross-sectional dependence test, panel unit root test, panel cointegration analysis, estimation using the Pool Mean Group (PMG) method, and the Dumitrescu–Hurlin causality test. In the long run, our empirical results exhibit that, real GDP and real interest rates have a statistically significant negative impact on nominal exchange rates, while money supply exhibits a positive and significant effect. Causality analysis indicates unidirectional causality from real GDP and money supply to the nominal exchange rate, as well as from the exchange rate to the interest rate. Additionally, reverse causality exists between interest rates and money supply. No causal relationship is observed between real interest rates and real GDP or between real GDP and money supply. From a policy perspective, this study recommends a joint coordination of monetary policies amongst the East African Community member states in order to reduce exchange rate volatility, fostering regional economic stability and resilience.

Financial Development and Income Inequality Across Different Income Brackets in Africa

Dickson Onyango Wandeda — 2025-03-06

The income inequality gap has persisted and worsened in African nations, posing significant socio-economic challenges to the continent. Financial development has been proposed as a potential mechanism for reducing income inequality. However, various studies have produced inconsistent results regarding the finance-income inequality nexus. Against this background, this paper employs a two-step system GMM on a panel of 20 African countries for the period 2004–2017 to investigate this nexus. The analysis was conducted on the overall sample and across different income categories of African nations. The study reveals that the relationship between various aspects of financial development and income inequality differs between market (pre-transfer) and net (post-transfer) inequality measures, and across different income groups in African countries. The study highlights that policymakers in African countries need to prioritize comprehensive financial sector development strategies that go beyond merely increasing access to financial services. Policies should aim to enhance financial depth while simultaneously improving efficiency and stability, with a particular focus on the transition from low to middle-income status.

Asymmetric Effects of Monetary Policy on Agricultural Performance in Nigeria

Olusola O. Ogunjinmi — 2025-03-06

This study investigates the asymmetric effects of monetary policy on agricultural performance in Nigeria from 1981 to 2021, employing the Nonlinear Autoregressive Distributed Lag (NARDL) model. The analysis reveals an asymmetric relationship between monetary policy rates and agricultural output. In the short run, positive changes in the monetary policy rate significantly enhance agricultural performance, whereas negative changes have a less pronounced effect. Conversely, in the long run, negative changes in the monetary policy rate significantly hinder agricultural performance, underscoring the critical role of maintaining lower policy rates to support agricultural growth. Further, the positive changes in lending interest rates directly influence agricultural output, while negative changes exert indirect effects. However, long-run variations in lending rates, whether positive or negative, negatively impact agricultural performance, though insignificantly. Additionally, the liquidity ratio shows short-run significance, with positive changes enhancing and negative changes constraining agricultural performance. In the long term, liquidity ratio variations are not statistically significant. Finally, the study uncovers a counterintuitive finding: deposit money banks’ credit to agriculture negatively affects agricultural performance in the short run but exhibits a significant positive impact in the long run during periods of reduced credit. The findings suggest the maintenance of low monetary policy rates, improvement in credit allocation mechanisms, stabilization of financial institutions’ liquidity management, and implementation of targeted interventions such as subsidizing lending rates and strengthening agricultural credit schemes to drive sustainable agricultural growth in Nigeria.

Influence of Trust, Service Quality and Extrinsic Motivation on E-Tax Filling System and Compliance Burden in Tanzania

Rufina Milamo — 2025-03-06

This study investigates the impact of trust, service quality, and extrinsic motivation on taxpayer’s engagement with electronic tax filing systems, alongside the relationship between system engagement and the tax compliance burden. The study utilized partial least squares structural equation modelling (PLS-SEM). The analysis draws on survey data collected from 230 business taxpayers in Dar es Salaam, Tanzania. The results demonstrate that trust, service quality, and extrinsic motivation significantly drive taxpayer’s engagement with the e-filing system, concurrently reducing the compliance burden. Additionally, the model exhibits robust predictive validity for cases beyond the sampled data. These findings underscore the importance for tax authorities to foster greater taxpayer engagement by building trust and enhancing service quality. The study offers critical insights for optimizing e-filing systems, emphasizing administrative strategies that can improve taxpayer benefits and streamlining compliance processes.

Women Inclusion for Exports Trade Integration in COMESA

Magdalane Malinda Kikuvi — 2025-03-07

This study analysed the effect of women inclusion on export trade integration in COMESA’s 17 Member States between 2000 and 2022. The study employed the Pseudo Poisson Maximum Likelihood estimator (PPML) on panel data from COMESA’s 17 Member States. The study findings showed that women inclusion affects export trade integration differently in COMESA based on the variable of interest. Women’s political and economic inclusion dampen export trade integration in COMESA. On the other hand, the study findings showed that women’s social inclusion boosts export trade integration in COMESA. From the findings, the study recommends improving women’s social inclusion by improving their contribution to human capital and, ultimately, export trade participation, thus boosting trade integration in COMESA.

Navigating Digital Literacy Skills within the Public Sector in Tanzania: A Gap to Achieve Sustainable Digital Economy

Herman Mandari — 2025-03-07

This study explores the digital literacy skills of public sector employees in Tanzania and examines how education levels and internet connectivity influence digital skills development. The research investigates the role of digital literacy in supporting a sustainable digital economy. A cross-sectional survey collected data from 594 employees across various public service institutions. A structured questionnaire assessed digital skills such as communication, creativity, critical thinking, information management, and problem-solving. The data were analyzed using descriptive statistics and the Partial Least Square Structural Equation Modeling (PLS-SEM) was used to identify the relationships between the variables. The findings reveal that employees with tertiary education and regular internet access demonstrated significantly higher proficiency in advanced digital skills. Education and internet access emerged as key factors supporting the development of these skills. Additionally, advanced digital skills such as information skills, critical thinking, and creativity were found to significantly impact the fostering of a sustainable digital economy. This study highlights the need for targeted educational programs and improved digital infrastructure to bridge the digital literacy gap in Tanzania's public sector. The results provide valuable insights for policymakers aiming to enhance the effectiveness of public services through digital transformation and contribute to the broader discourse on sustainable digital economies.