Latest News, Publications and Workshops

Latest Publications

Why local context matters: de jure and de facto property rights in colonial South Africa

Christie Swanepoel and Johan Fourie
Property rights remain important for economic growth and development, but more recent research have started to show that it is more complex – the local conditions also matter. We gave another example, here, of how local conditions and how these rights are perceived matters as well. Besley (1995) said “…formal (de jure) rights might have very little to do with the ability to exercise these rights (de facto).” If the answer of institutional economics is to give de jure property rights in land to individuals, without taking into account the local de facto conditions, property rights might not lead to the expected gains in economic growth. Schlager and Ostrom (1992) already called for investigation into “how various types of institutional arrangements perform comparatively when confronted with similarly difficult environments”. In line with the literature, we attempt to show the perception of property rights at the Cape, or the de facto mattered more than de jure property rights delineated by laws.

Economists suspect that property right regimes are rooted in the history of the region, but it has been difficult to proof the effect of this on economic development empirically. We do this by investigating property rights’ role in the debt market of the Cape colony. The Cape offers an alternative to the development of de jure and de facto property rights. At the Cape, property rights of loan farms were developed from de facto property rights to de jure property rights, while other case studies like the United States, Australia and Brazil developed from de jure property rights to de facto property rights. The two land tenure systems, freehold and loan farms, of the Cape enabled us to study individuals with the different types of property and to compare them one another. The contribution of this research has been to focus on a microeconomic outcome, individual debt levels, rather than macroeconomic outcomes.

Economic theory would suggest land is only valuable for debt transactions if there is no asymmetry and uncertainty regarding land rights. Historians of the Cape have suggested the de facto property rights of the loan farms were the same and as secure as the freehold farms, even though the de jure rights between the systems differed. Our hypothesis was that individuals with freehold farms had more secure de jure property rights and freehold farms should therefore be more valuable for debt transactions. On this basis, individuals with freehold farms should have more debt. The descriptive statistics certainly supported this hypothesis; individuals with freehold farms had higher correlations with debt relative to individuals with loan farms or individuals with no farms. However, after accounting for endogeneity concerns regarding the relationship between debt and land rights, the significance of owning a freehold for debt transactions disappears. We tested the assumption by using an instrument of the oldest son, who had a higher probability of owning a freehold farm. These results support the historiography which suggested that property rights between freehold and loan farms were similar in de facto regimes, and also that individuals in a society would rather rely on these de facto rights when considering economic transactions. Our results provide empirical evidence for what historians have suspected: that the institution of property right depends on the society in which it is embedded. Instead of formal de jure rights, how rights are perceived and used by individuals (de facto) is likely to have a bigger influence on economic transactions.

The Nexus between Infrastructure (Quantity and Quality) and Economic Growth

This paper examines the growth effects of infrastructure stock and quality in Sub Saharan Africa (SSA). While previous studies established that the poor state of infrastructure in SSA slows economic growth, there is little evidence on infrastructure quality and a robust analysis on the causal links between infrastructure and economic growth.

How are Africa’s emerging stock markets related to advanced markets? Evidence from copulas

Jones Odei Mensah and Paul Alagidede
This paper focuses on two key questions: How are Africa’s emerging stock markets related to advance stock markets? Do extreme price movement in advanced stock markets have an impact on African stock markets? The importance of this work stems from the fact that the nature of dependence across stock returns plays a crucial role in asset pricing, portfolio allocation and policy formulation. Investment practitioners pay close attention to the co-movement between equity markets, as a proper grasp of its nature and measurement affects the risk-return trade-off from international diversification; typically, international portfolio diversification becomes less effective when markets are in turmoil. Policy makers, on the other hand, are more interested in how strong linkage across stock markets influences the transmission of shocks, its consequences as well as implications for risk management.

The paper applies copula models to investigate the time-varying dependence pattern between advanced and African stock returns. We characterize the bivariate dependence structure between African and other international stock returns through copulas. To model the dynamic dependence, we use the Generalized Autoregressve Score (GAS) model proposed by Creal et al. (2013), which uses the standardized score of the copula log-likelihood function to update parameters over time. There are three key advantages of using this method. First, copula-based models provides much flexibility in modelling multivariate distributions by making it possible to fit models for the marginal distributions separately from the dependence structure (copula) that connects them to form a joint distribution. Second, copula functions allow us to model dependence in extreme market conditions and they signify both the degree and structure of the dependence. Third, unlike linear correlation, copula functions are invariant to non-linear strictly increasing transformations of the data. Thus, copula functions provide a realistic description of the dependence in financial assets.

In our empirical analysis, we find that dependence structure between African and international stocks varies overtime, but generally weak. There is asymmetric and weak tail dependence for all the countries, implying stock return co-movement varies in bearish and bullish markets and that the dependence is generally not strong in extreme market conditions. The paper then investigates African stock market quantiles conditional on advanced stock price movements, with the aim of uncovering shock spillovers. We find that extreme downward stock price movements in the advanced markets do not have significant spillover effects on Africa’s emerging stock markets.

The evidence presented has important implications for market participants and policy makers in diverse ways. First, the presence of weak dependence between African and advanced stock markets points to the potential gains for international investors holding African stocks. Our finding should regenerate interest amongst practitioners to reassess how assets are allocated for effective diversification. Second, our results imply that African markets are immune to risk spillovers from the more advanced markets and the tendency to boom or crash together is minimal. In light of recent volatility in global stock markets with the associated spread of contagious shocks from advanced to emerging markets, as well as the broad macroeconomic implications, our findings might be useful to policy makers and regulators, particularly in African countries, in designing and implementing appropriate intervention policies.

Do monetary policy announcements affect foreign exchange returns and volatility? Some evidence from high-frequency intra-day South African data.

This paper examines the temporal effect of domestic monetary policy surprises on both the levels and volatility of the South African rand/United States dollar exchange rate. The analysis in this ‘event study’ proceeds using intra-day minute-by-minute exchange rate data, repo rate data from the South African Reserve Bank’s scheduled monetary policy announcements, and Bloomberg market consensus repo rate forecasts.

Demand-side determinants of access to healthcare services: Empirical evidence from Africa

Serge Wa Ntita Kabongo and Josue Mbonigaba
Improved health status in Africa is one of the most important items on the international development agenda. The significance of better health status in development-related policy making stems mainly from the linkages between better health status and increased productivity as well as enhanced well-being.

Better health status is influenced by access to health care, among other factors. In turn however, access to health care is dependent on the availability of health facilities and infrastructures.  The expected effects of these amenities on access to health care caused almost all research and policy making to focus on these supply-side factors.  Resolving the supply-side issues cannot however be a panacea to the problem of limited access to health care in the context of African continent. While there has been an effort to increase the number of health facilities on the continent, most recent research reported an increasing underutilization of these facilities, suggesting the need to investigate demand-side factors underlying the access to health care.

It is in this perceptive this need that the present study was undertaken to advise policy making in the continent. Specifically, the study analyzed the effects of demand-side factors of access to health care with a special attention to income, the structure of the population and the price of health care measured in terms of distance to health facilities. The study used panel data collected from the World Bank Development Indicators and the World Health Organisation databases for the period 1995-2012, for 37 African countries. Panel cointegration was the most relevant empirical strategy, which distinguished the effects of demand-side factors on access to health care over a short period of time and these effects over a long period of time. The findings were also presented separately for countries by income levels according to the most recent World Bank classifications

The study found that over a long period of time, income is the most important policy variables that should be targeted in order to influence an increased access to health care. For the countries covered by the study, an increase in income by 100% resulted in an increase in access to health care by 11%. The data analyzed also showed that access to health care remains a necessity for all African countries in these studies. The income was however not an important policy variable in a short period of time, except in 5 countries notably, Congo Republic, Mali, Mauritius, Morocco and Seychelles. The study found further that the distance to health facilities, measured by the volume of fuel consumption was positively associated with access to healthcare over a long period of time. An increase in the volume of fuel consumed by 100% resulted in an increase in access to health care by 6%. This finding is unexpected in case the volume of fuel consumption is a result of more distances travelled. However, this result can be expected in case more fuel consumption is a result of more frequent commuting which might ease access to health care and reduce transport fares as a result of competition. The plausibility of the latter explanation can be indeed argued in terms of the fact that transport sector is one of the most lucrative sectors in Africa. Over time, the investments in the sector might have contributed to increase in transport services more generally which in tum increased access to health care services.

The findings from this study have significant policy implications. On the one hand, policy makers, whether at an international level or at a country level, should consider income-related policies or policies targeting transport infrastructures in Africa to improve access to healthcare in the long run. On the other hand, they should take cognisance of the fact that African countries respond differently to shocks and that policies that produce effects in a long period of time might have limited effects in shorter periods of time, requiring some mitigating policies, depending on the type of shocks, that would be effective in promoting access in shorter periods of time. 

Latest Workshops

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.

The Third ERSA Political Economy Workshop

Tuesday, February 16, 2016 to Wednesday, February 17, 2016

Economic Research Southern Africa (ERSA) and the Institutions and Political Economy Group (IPEG) at the University of the Witwatersrand invite SA-based researchers with a focus on political economy, including public choice, to participate in the upcoming February 2016 workshop. Contributions, even in progress, on all political economy topics will be considered though preference will be given to: corruption, dictatorship, fiscal federalism, intergovernmental grants, political entrepreneurship, and regulation.

What church records can tell us about economic development

Friday, January 22, 2016 to Saturday, January 23, 2016

Because colonial sources often lack adequate information about the lived experience of Africans, quantitative economic historians that are interested in the African experience are forced to find creative ways to identify the effects of colonial policies. Church records at the individual level provide one such recourse.