Monday, April 30, 2012

Sudans' economic war?

Some interesting recent analyses of the correlation between economic issues and the conflict between the Sudans (and my causal interpretation of each one):
  1. The $7bn black hole. (causality: war for money)
  2. A distraction from the current financial situation.   (no money -> public discontent -> war as excuse)
  3. Make trade no war. (money for war: no business with the enemy)
  4. The primary issue is about oil (war for money)
  5. Development and Conflict (reverse causality, with serious official statistical juggling)  
  6. Love for the bomb  (money for bombs)
  7. A war neither can afford (war for money... but no money for war)

    Monday, April 23, 2012

    Facts about Juba

    This post starts a summary of reflexions about the 10 days I stayed in Juba at the beginning of April 2012, with a group of fact finders from Goethe Frankfurt University. The facts I will present are personal views and reflect experiences just before the battle of Heglig, when the causes of the fire in Konyo Konyo market were more important in the local news than a possible new confrontation with the North. 


    Fact 1: Juba is Nice

    There is quite a lot of evidence related to an increase of pro-social behavior in people affected by war (like here and here, for the opposite see here). I don't know if this is the reason, or is just that “Jubaneses” (I couldn’t really find the proper demonym) are nice, but I was amazed by how friendly and respectful is most of the people there (both locals and recent immigrants). And it was not just a funky behavior towards white men. Khawajas are just one more in the chaotic mosaic of different local tribes, Arabs, East Africans, Chinese, etc...

    Of course, the city will not be nice to every eye. While the 47° that we were facing those days, right before the beginning of the rainy season, seem to calm down city’s spirit during the day, as soon as the sun starts setting, aliveness and chaos take control of the streets, particularly the days that electricity will just start working at 19:00. Is the moment for the electric haircut machines, the sound systems and the cold beers. No traffic lights yet, but many streets lights instead. And Juba’s traffic is something. I am glad I was raised in the wild streets of Santiago de Chile, always ready to play torero with the cars. No even talk of boda-bodas. I am not sure if the licensing system was really working, but SENKE daredevils were all around.

    Indeed, traffic accidents were always at the top of the most important topics in the security assessments that we received. While various other parts of the country are under strict travel warning, in Juba boda-accidents, petty crime and crocodiles in the Nile were more of a concern than landmines, LRA or tribal clashes. I never felt less safe than in many cities I have been before (including various neighborhoods of Washington DC).

    Yes, many expats were in some nice “safety heavens”. But we were staying besides University of Juba, not too close to the more globalized spots of the city. Here it was more a mix of students, university personnel and immigrants from neighboring countries. And this spot of the city was the restless corner of the days we stayed: a very Latin-American style students movement was the matter in public order. But still it was quite a sparkling nightlife in the area, and University Staff Club was never running out of Tuskers.

    At least in my personal view, Juba is now a nice city.

    Fact 2: Juba is Booming

    You do not need any training in economics to realize that Juba is booming! Not sure if the title of the fastest growing city in Africa is correct, but it will not be a surprise.

    Clearly the construction boom is not going up... it is going aside. While few red bricked buildings are on the way to be built, the construction-mania has rearly more than two or three floors. Sometimes taking the form of a fancy presidential palace, the headquerters of an NGO, a new electronics shop, a well equipped garage for Toyotas or a SENKE emergency room... Juba is spreading!

    When we were landing in our Ethiopian from Addis, and I was used to the desertic landscape of the 2 hours ride, the sudden excitement of the sight of the famous Nile from the sky was more powerful than my aerial search for Juba. The lack of high buildings makes it difficult to see the city in advance, and I just had time to notice a mixture of tukuls and shacks… I thought it was a village near Juba…. but then I realized that entire new neighborhood-villages are being raised recently inside the city.

    It is not clear the current number of inhabitants, but we heard estimates ranging from 250,000 to one million... but is clear that the population has at least doubled in the last 6 years.  

    The frantic boom was confirmed with the hundreds of trucks from Uganda, Kenya, Ethiopia and the UN, driving along with the 4WDs and SUVs, from international organizations (I am now familiar with all the logos!) and  lucky locals. A mix of international aid and private development, not necessarily well tuned together. 

    There was money, there was oil… but now there is not anymore. It is to be seen if the peace dividend will survive austerity measures  (and if, hopefully, peace itself will remains).

     Fact 3: Juba is East Africa

    For anyone following even sporadically the North-South Sudan conflict, it must be clear that a very important part of the complicated equation of war is Arab world versus Sub-Saharan Africa. And when you are in Juba is clear, you are in East Africa.

    I am not so familiar with the region, but Tanzanian textiles, Kenyan beers, Ethiopian food, Eritrean bars and Ugandan music were at home.  And the many recent migrants from these neighbor countries as well.

    Even the language is evolving towards the Southeast. Juba Arabic is what people talks, but the language of Shakespeare is becoming very prominent (and was chosen as official language), and it is not too adventurous too say it will be the main language in a decade or less.

    If cultural integration has been important to develop this sense of identity, it is likely that economic integration will make it even stronger. The road to Kampala is getting a lot better, and many new goods are coming from this way. And if the Lamu corridor becomes a reality, the future will look at the East more than ever.

    Also in sports, like football and  basketball , cheering and hopes are more in the South than anywhere else.

    On the way to Juba 

    Tuesday, April 17, 2012

    Biographical Dictionary of Africans: the real one!

    "This is an historic event since it is the first dictionary of its kind written by one African."
    And I can give faith that this is true! even I haven't met the author personally, Jean I.N. KANYARWUNGA, I know his wife from the Graduate Institute in Geneva, and the "seventeen years of strenuous research" are absolutely true. I have also read his semi-fictional book L'Envers du parchemin.

    In a continent that needs to write its own history, the appearance of this 832 pages dictionary with more than 2,500 biographies is a great contribution.
    Some have made history, others were victims, many are his creatures.
    They are conquerors, politicians, writers, filmmakers, actors, athletes, musicians, artists, religious, saints, popes or humble citizens, whose fates are confused with that of their region, their country and their continent.
    Qu’ils méritent le piédestal ou le gibet de l’Histoire, qu’on les adule ou qu’on les abhorre, ils restent, au-delà de toute controverse, les repères incontournables de la mémoire du continent et constituent, à l’instar des monuments et/ou des pyramides, son legs au patrimoine culturel universel. (French post here)

    I understand the dictionary is just available in French in the meantime (only for 40,00 € !), but it seems that at some point will be also available in English.

    Thursday, April 12, 2012

    Only Marshallian inefficiency? How a framed field experiment helps to identify another cause of the inefficiency of sharecropping contracts.

    This post continues a series of notes from guest bloggers about papers presented at the CSAE conference 2012. Niels Kemper (University of Mannheim) summarizes the results of his paper about the effects of different type of contracts on real-effort tasks performance 

        From the classical economists such as Adam Smith, John Stuart Mill and Alfred Marshall up to the day, economists are interested in the efficiency of contractual land arrangements such as sharecropping and fixed-rent tenancy, of which the former is believed to induce less effort as compared to the latter, because tenants receive only a fraction of their marginal product of labor under sharecropping (the so-called Marshallian inefficiency). Given the prevalence of small-scale agriculture in developing countries, the mode of contracting land and labor and thus the claim to yields from land are directly linked to welfare and poverty.

    Empirically, this is commonly tested by comparing input and output intensities on sharecropped and rented plots in survey data. However, empirical analysis based on survey data may be confounded due to factors which are hard to observe and thus to measure (such as individual risk attitudes, effort, ability etc.). Taking a framed field experimental approach allows varying contracts independently of all unobserved factors and therefore to elicit the pure incentive effect of contracts. Further, the design of the experiment allows us to identify another cause for the inefficiency of sharecropping.

    Measuring the incentive effects of typical agricultural contracts, the experiment employs a real-effort task resembling sorting processes that occur in agricultural production. Given that the economy in rural Ethiopia is relatively abundant in labor and relatively scarce in capital, these sorting processes are quite common. The real-effort task involves the sorting of haricot beans of different colors in a given time period. The experiment consists of 25 sessions with 20 participants each. Four contracts were randomly assigned to sessions: Wage, sharecropping, fixed-rent and ownership. The payout of the participants depended on the terms specified in the respective contract and the participant’s real-effort output during the experiment (except for the wage treatment in which the payout was held fixed for all levels of real-effort output).

    The table below contains the central findings of the paper, regressing real-effort output on the sharecropping (C2), fixed rent (C3) and ownership contract (C4) (the wage contract is dropped as a reference and therefore all coefficients have to be interpreted relative to the wage contract). Column (1), for instance, states that real-effort output is 2.8 percent lower in the sharecropping treatment than, 9,6 percent higher in the rent treatment and 7.1 percent higher in the owner contract (in all three cases as compared to the wage contract).

    In line with basic economic theory, rent and owner contracts induce the highest real-effort. But surprisingly, real-effort output from sharecropping and wage contracts cannot be statistically distinguished. If sharecropping was only Marshallian inefficienct, it should induce more effort than the wage contract (but less effort than rent and owner contract). This implies that there must be an additional reason for the inefficiency of sharecropping.

    Semi-structured interviews (carried out after the experiment) imply discontent with real life sharecropping contracts among participants across almost all study sites. To quote a typical answer:
    Sharecropping is not my first preference, but the land owners force this land arrangement upon me. Because I only have limited plot size I have to accept sharecropping. (A Farmer interviewed in the Kebele Yetejan)
    Regarding this, further data analysis shows that the subgroup of real life sharecroppers behaves different from non-sharecroppers in the experiment (in particular, they exercise less effort under the sharecropping and more effort under the rent contract). Real life discontent with sharecropping contracts spills over into the experiment and therefore presents an efficiency loss which comes in addition to the Marshallian inefficiency.

    Niels Kemper is a postdoctoral researcher at the Chair of Econometrics, University of Mannheim, Germany.

    Kemper, N. (2012). Field experimental evidence on the incentive effects of agricultural contracts on real-effort output in Ethiopia. Presented at the CSAE Conference 2012: Economic Development in Africa.

    Tuesday, April 10, 2012

    \m/ Metal for development \m/

    It is clear that the number of metal bands is highly correlated with income per capita. For me the causality is very clear: listening metal makes you more intelligent and productive. Anyone disagrees?

    Chile has the highest index of metal bands per capita in Latin-America, and one of the highest in the world, at levels comparable to Germany. Now we can really claim to be a developed country!

    Thursday, April 5, 2012

    Contagious FTAs

    Even this is not really a development paper, I think I received the very good news of the acceptance of my work on contagious Free Trade Agreements with Richard Baldwin in the Journal of International Economics a lot more as a development than as a trade economist: shouting and jumping in a Internet cafe in Juba, and then toasting with Black Label at the Ethiopian bar besides (6 South Sudanese pounds for the double shot). After 4 years of hard work with that paper, not even in my craziest dreams I could have imagined a better setting!

    In the paper we show that even when countries might not have incentives to open to trade using FTAs, they will sign defensive FTAs to reduce the discrimination created by agreements of their neighbors. Using an index gleaned from Spatial Econometrics techniques, we show empirical evidence for the Domino Theory of regionalism, made famous by Richard in the early 90s.