Latest News, Publications and Workshops

Latest Publications

Emigration and education: the schooling of the left behind in Nigeria

Biniam Bedasso, Ermias Gebru Weldesenbet and Nonso Obikili
Despite recent political backlash in Europe and the United States, international migration remains a formidable force with wide-ranging consequences in destination and origin countries. The presence of a migrant family member living in a developed country could have multifaceted implications for the welfare of the left behind. In our recent paper we attempt to examine the impacts of international migration on the education of family members left behind in Nigeria. Specifically, we study the net effects of the presence of a migrant family member living in a foreign country on the educational attainment of family members back at home at both secondary and post-secondary levels. We then examine the role of the prospect of future migration, inspired by the presence of a family member abroad, as a potential channel mediating the effect of emigration on family education. By conducting such analysis for Nigeria, the most populous country on the African continent, we hope to shed light on the human capital implications of migration in one of the poorest regions in the world.

The link between emigration and education is often viewed from the point of the view of the emigrant without much consideration for spill-over effects on those left behind. That is why the issue of migration from developing countries tends to raise the spectre of brain drain. This is a legitimate concern given the selectivity involved in attracting skilled migrants from developing countries that do not share borders with developed countries. However, this concern has been countered with the argument that the prospect of migration may lead to a net increase in the stock of human capital of the origin country by encouraging more individuals than who will eventually emigrate to invest in education. In this regard, the potentially positive impact of migration on the education of the left behind might not be limited to household wellbeing. It could also extend to improving aggregate human capital despite initial loss through brain drain.
 
The presence of a migrant family member in a foreign, and usually, more developed country could influence the education of the left behind through a number of potential channels. The first potential channel is remittances. Remittances may help to relax the credit constraint that is often behind underinvestment in education in many developing countries. As a second potential channel, the absence of family members from home may affect education of the left behind negatively by depriving them of proper guidance and role models or burdening them with extra household responsibilities. The third potential channel is the improved probability of future migration of the left behind. The argument for this channel rests on two assumptions. First, the presence of family members and other social networks in destination countries plays an important role in encouraging new emigration to those destinations. Second, on average, there is higher return to education in destination countries than in origin countries.
 
In our recent paper, the primary objective was identifying the net effect of the emigration of a family member on education that may have been transmitted through a variety of channels. But, as a
secondary objective, we also test the effect of future own emigration as a channel. We focus on the probability of future emigration as a potential channel for two reasons. First, the prospect of future emigration is deemed to affect the expected returns to education more directly than competing channels such as remittances which exert influence through the budget constraint. Second, as far as our geographical focus is concerned, more migrants from African countries move to the US and the European Union through the help of family reunification programmes than any other means, lending credence to the importance of family network for migration.
 
Although the key propositions we test are rooted in human capital theory, the scope of the study was mainly empirical. We used completion of secondary school and attendance of postsecondary education as alternative outcome variables. Completion of secondary schooling has become an important indicator of social progress in developing countries since the expansion of primary schooling in most of these places in recent years has led to churning out of students eligible for secondary education. Moreover, secondary education is arguably the minimum requirement for most migrants to be able to cope up with life and work in foreign countries. For example, the United States Diversity Visa programme that grants 50,000 permanent residence visas annually via lottery requires winners to have attained a minimum of 12 years for formal schooling. In this regard, we expect that migration of a family member has a positive impact on completion of secondary education by the left behind. Postsecondary education, on the other hand, may involve more strategic considerations than secondary schooling. For instance, people might defer investing in postsecondary education in their home countries if they expect to migrate to another country in the near future. But, it could also be the case that postsecondary education increases both the chance of migration and the return to education in prospective destination countries. Thus, the effect of migration on postsecondary education depends on a number of factors including timing, perceived probability of migration and the comparative quality and cost of education in origin and destination countries.
 
We employ household and individual level data from the migration and remittances survey conducted by the World Bank in 2009 to do the empirical analysis. Making causal inference regarding the link between migration and education requires identifying an exogenous source of variation for migration. We use proportion of international migrants form the same town as the respondent and distance to a foreign mission/church in 1921 as instruments for the presence of a migrant family member. Accordingly, we use two-stage least squares estimation to measure the net effect of migration on the education of the left behind. Once we have estimated the main coefficients of interest, we then test the relevance of the prospect of future migration of the left behind as a channel. This is done by estimating the predicted probability of migration as a function of the presence of a migrant family member. We then estimate the effect of the predicted probability of future migration on educational attainment.
 
Firstly, we find a positive and significant impact of having a migrant member of the household on the probability of completing secondary school, and attending post-secondary school. This result is robust to various specifications and estimations techniques and is validated by using various exogenous measures of migrant networks as instruments. Secondly, we find that being in a migrant household increases the
probability of own future migration. Finally, we find that the probability of own future migration is positively correlated with the probability of completing secondary school or attending post-secondary school. Our results help understand the dynamics and channels through which migration influences human capital development of those left behind.

Can creditor bail-in trigger contagion? The experience of African Bank

Roy Havemann
The economic costs of bank failures can be substantial, and the resulting reprioritisation of government resources has long-lasting economic, political and social costs. To reduce the cost of failures to taxpayers, recent global regulatory reforms have focused on `burden-sharing arrangements', which aim to share the costs of bank failures between creditors and government. These reforms include `creditor bail-in', a mechanism to write-down the claims of creditors during the bank resolution process. The unintended consequences of bail-in are largely unknown and there are few successful examples.

The successful bail-in of creditors in African Bank, a small South African monoline lender, provides a unique opportunity to study creditor bail-in. Using a data set that matches quarterly, daily and financial-instrument level data, the focus here is on the impact of the bail-in on mutual funds, particularly money-market funds, which experienced significant redemptions during the episode. The haircut triggered some financial contagion, through interlinkages between affected money-market funds and other banks. The contagion was limited by a clear and credible resolution strategy, a relatively small haircut and complementary interventions for money-market funds, including discretionary liquidity restrictions and market-making facilities. The spillover effects receded. As the bank recovered, bailed-in senior creditors recouped nearly all their losses, and ultimately the bail-in process facilitated a sustainable restructuring of the bank.

The paper exploits a unique data set, containing both daily and quarterly frequencies, including data down to mutual fund holdings at financial instrument level. Controlling for other factors which may influence redemption patterns, redemptions occurred disproportionately in money-market funds with African Bank exposure. There is evidence of financial contagion, albeit limited. A larger failure, or a poorly designed resolution, could have triggered broader spillovers with possible systemic consequences. The impact on money-market funds is compared to that of non-money market mutual funds. While these fund also saw outflows, the effect was dampened by their floating net asset value.

The paper exploits a unique data set, containing both daily and quarterly frequencies, including data down to mutual fund holdings at financial instrument level. Controlling for other factors which may influence redemption patterns, redemptions occurred disproportionately in money-market funds with African Bank exposure. There is evidence of financial contagion, albeit limited. A larger failure, or a poorly designed resolution, could have triggered broader spillovers with possible systemic consequences. The impact on money-market funds is compared to that of non-money market mutual funds. While these fund also saw outflows, the effect was dampened by their floating net asset value.

The findings suggest that creditor bail-in is a potentially useful resolution tool, but needs to be used carefully. Unexpected bail-in may precipitate spillovers throughout the financial system, and financial contagion may result. The systemic consequences can be reduced through a transparent and clear ex ante bail-in framework, supported by enhanced regulation of mutual funds, particularly money-market funds, to reduce their fragility. Regulatory reforms can reduce the systemic risk posed by money-market funds, e.g. phasing out fixed net asset value, allowing discretionary liquidity restrictions and introducing powers to suspend convertibility

Quality of life: Validation of an instrument and analysis of relationships between domains

Quality of life (QoL) is now widely recognised as a multidimensional concept. This study validates an instrument to measure multidimensional QoL, and investigates the relationships between the domains thereof. The domains analysed are: health, housing and infrastructure, socio-economic status, social relationships, governance and safety. We utilise a rich household-level dataset collected by the GCRO on QoL in the Gauteng city-region of South Africa.

Shaking Out or Shaking In: The Impact of Zimbabwe’s Economic Crisis on the Country’s Manufacturing Sector Allocative Efficiency

Nicholas Masiyandima and Lawrence Edwards
Following Zimbabwe's economic crisis between 1997 and 2009, a number severe policy reversals from the achievement of reforms and a more competitive manufacturing sector attained through the 1991 to 1995 IMF/World Bank supported Economic Structural Adjustment Programme, were instituted by the country's authorities in their quest to rescue the crisis. These included selective credit, selective foreign exchange allocation and at worst directed marketing of basic commodities at the height of the crisis. These firm and industry specific interventions complemented the already existing crisis induced idiosyncratic shocks on industry and firms.

On the basis of the resource misallocation hypothesis, we asked the question on whether such idiosyncratic shocks and interventions had a bearing on the country's within industry resource allocation efficiency and potentially on its aggregate manufacturing sector productivity. The study finds that there were significant losses on the country's aggregate productivity due to worsening resource allocation inefficiencies during and after the crisis. The results of the study have suggested the existence of a positive correlation between the escalation of these selective interventions and shocks and inefficiencies in the country's within industry resource allocation. Lessons have been drawn from the cases of Ghana and Kenya, whose manufacturing sectors were less competitive than that of Zimbabwe in the mid 1990s but which remained steady fast with industry policy reforms and managed to grow their aggregate productivity through improved manufacturing sector resource allocation efficiencies between Zimbabwe's pre and post crisis periods.
 
The study is novel in considering the resource allocation inefficiency implication in Zimbabwe following its crisis, which is one of the worst economic crisis in history. The study has also illustrated how economic crisis in a small country, as opposed to crisis in large economies, can be costly, with the costs persisting into the post crisis period due to policy inertia and weak willingness to embark on market reforms by the affected country authorities.
 
The study suggests relevant policy handles for the government of Zimbabwe and other developing countries which experience crisis similar to Zimbabwe's to consider urgent implementation of policy reforms that are pro resource allocation efficiency as well as to desist from use of selective firm and industry policies and interventions.

Sanctioned Quotas vs Information Provisioning for Community Wildlife Conservation in Zimbabwe: A Framed Field Experiment Approach

We investigate the behavioural responses of resource users to policy interventions like sanctioned quotas and information provisioning. We do so in a context when multiple resources (pastures and wild animal stocks) are connected and could substantially and drastically deteriorate as a result of management. We perform an experimental study among communities that are managing common pool wildlife in Zimbabwe.

Latest Workshops

Skills Development

Monday, July 3, 2017 to Friday, July 7, 2017

Call for Application for Skills Development Training in Econometrics

The ERSA is pleased to invite applications for the Skill Development Training Programme in basic Econometrics for academics and postgraduate students (masters and PhD) with limited training in Econometrics and quantitative methods. The skills development initiative is in line with ERSA’s objective to deepen economic research capacity and to train young economists in Southern Africa.

7th Annual Meeting of the African Economic History Network: Innovation and the African Past

Wednesday, October 25, 2017 to Friday, October 27, 2017

The African Economic History Network, in association with the Laboratory for the Economics Africa's Past at Stellenbosch University, Harvard Univeristy's Center for African Studies and Economic Research Southern Africa announces a Call for Papers.

Lecture Series in Economic Theory: "Asymmetric Information in Markets and Organizations"

Monday, March 14, 2016 to Tuesday, March 15, 2016
In part 1 of this lecture, we are going to introduce the basic set-up of credence goods markets and discuss how markets should be designed to provide the right incentives for experts and their customers. The theoretical analysis will be complemented by the discussion of evidence of expert behaviour and market outcomes from empirical as well experimental studies. 
 
In part 2 of the lecture, the emphasis will be on information disclosure by interested parties and evidence provision by intermediaries.