This paper explores the relationship between tax rates and tax evasion in a low-income country context: Ethiopia. By using transaction-level administrative trade data, we are able to provide an analysis that is largely comparable with the rest of the literature while also introducing two important innovations. First, we compare the elasticity of evasion to statutory tax rates and effective tax rates (ETRs). Most studies in the literature so far focused on the former. We show that ETRs are the most relevant parameter to explain evasion in contexts where exemptions are widespread, which results in a large divergence between ETRs and the statutory rates set out in the law. Second, we account for trade costs more precisely than the previous literature by adjusting the trade gap rather than controlling for proxies. We argue that this new approach to accounting for trade costs is superior to those previously adopted in the literature.
{"title":"Trade Tax Evasion and the Tax Rate: Evidence from Transaction-level Trade Data","authors":"A. Mengistu, K. G. Molla, G. Mascagni","doi":"10.1093/JAE/EJAB005","DOIUrl":"https://doi.org/10.1093/JAE/EJAB005","url":null,"abstract":"\u0000 This paper explores the relationship between tax rates and tax evasion in a low-income country context: Ethiopia. By using transaction-level administrative trade data, we are able to provide an analysis that is largely comparable with the rest of the literature while also introducing two important innovations. First, we compare the elasticity of evasion to statutory tax rates and effective tax rates (ETRs). Most studies in the literature so far focused on the former. We show that ETRs are the most relevant parameter to explain evasion in contexts where exemptions are widespread, which results in a large divergence between ETRs and the statutory rates set out in the law. Second, we account for trade costs more precisely than the previous literature by adjusting the trade gap rather than controlling for proxies. We argue that this new approach to accounting for trade costs is superior to those previously adopted in the literature.","PeriodicalId":51524,"journal":{"name":"Journal of African Economies","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2021-03-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/JAE/EJAB005","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41431122","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Despite the past centuries' economic setbacks and challenges, are there reasons for optimism about Africa's economic prospects? We provide a conceptual framework and empirical evidence that show how the nature of African society has led to three sets of unrecognised ‘latent assets.’ First, success in African society is talent driven and Africa has experienced high levels of perceived and actual social mobility. A society where talented individuals rise to the top and optimism prevails is an excellent basis for entrepreneurship and innovation. Second, Africans, like westerners who built the world's most successful effective states, are highly sceptical of authority and attuned to the abuse of power. We argue that these attitudes can be a critical basis for building better institutions. Third, Africa is ‘cosmopolitan.’ Africans are the most multilingual people in the world, have high levels of religious tolerance and are welcoming to strangers. The experience of navigating cultural and linguistic diversity sets Africans up for success in a globalised world.
{"title":"Africa's Latent Assets","authors":"Soeren J. Henn, James A. Robinson","doi":"10.3386/W28603","DOIUrl":"https://doi.org/10.3386/W28603","url":null,"abstract":"\u0000 Despite the past centuries' economic setbacks and challenges, are there reasons for optimism about Africa's economic prospects? We provide a conceptual framework and empirical evidence that show how the nature of African society has led to three sets of unrecognised ‘latent assets.’ First, success in African society is talent driven and Africa has experienced high levels of perceived and actual social mobility. A society where talented individuals rise to the top and optimism prevails is an excellent basis for entrepreneurship and innovation. Second, Africans, like westerners who built the world's most successful effective states, are highly sceptical of authority and attuned to the abuse of power. We argue that these attitudes can be a critical basis for building better institutions. Third, Africa is ‘cosmopolitan.’ Africans are the most multilingual people in the world, have high levels of religious tolerance and are welcoming to strangers. The experience of navigating cultural and linguistic diversity sets Africans up for success in a globalised world.","PeriodicalId":51524,"journal":{"name":"Journal of African Economies","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2021-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45800800","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
John P. Dougherty, Richard A. Gallenstein, K. Mishra
Recent research suggests that coupling microfinance loans with an index insurance policy may be a cost-effective way to expand credit market access to smallholder farmers in developing countries. Index insurance can increase demand for credit and encourage increased supply of credit by protecting borrowers and lenders from covariate production shocks that discourage credit market expansion. In this paper, we propose that index insurance, when bundled with credit, may also reduce a different barrier to credit market access: high transaction costs caused by moral hazard in the credit market. We develop a theoretical model of a competitive credit market with moral hazard. In this market, lenders use either dynamic incentives or collateral to mitigate the moral hazard problem. The model shows that index insurance bundled with loan contracts can reduce moral hazard and increase borrower welfare. We then test the model and find some empirical support using a subset of data from a randomised control trial in northern Ghana.
{"title":"Impact of Index Insurance on Moral Hazard in the Agricultural Credit Market: Theory and Evidence from Ghana","authors":"John P. Dougherty, Richard A. Gallenstein, K. Mishra","doi":"10.1093/JAFECO/EJAB003","DOIUrl":"https://doi.org/10.1093/JAFECO/EJAB003","url":null,"abstract":"\u0000 Recent research suggests that coupling microfinance loans with an index insurance policy may be a cost-effective way to expand credit market access to smallholder farmers in developing countries. Index insurance can increase demand for credit and encourage increased supply of credit by protecting borrowers and lenders from covariate production shocks that discourage credit market expansion. In this paper, we propose that index insurance, when bundled with credit, may also reduce a different barrier to credit market access: high transaction costs caused by moral hazard in the credit market. We develop a theoretical model of a competitive credit market with moral hazard. In this market, lenders use either dynamic incentives or collateral to mitigate the moral hazard problem. The model shows that index insurance bundled with loan contracts can reduce moral hazard and increase borrower welfare. We then test the model and find some empirical support using a subset of data from a randomised control trial in northern Ghana.","PeriodicalId":51524,"journal":{"name":"Journal of African Economies","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2021-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/JAFECO/EJAB003","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47288028","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Traders in informal grain markets often lack incentives to sell grain dried to a moisture level that is safe for storage, due to weak regulations and lack of low-cost moisture testing technologies. This study estimated the demand for a third-party moisture testing service in western Kenya that can encourage safe drying and reduce asymmetric information between buyers and sellers. We utilised a Becker–DeGroot–Marschak (BDM) auction to obtain maize traders’ willingness to pay (WTP) for the moisture testing service and compared it with two alternative multiple price list (MPL) mechanisms for eliciting WTP. Traders had the opportunity to bid on the testing service with two different moisture metres. The first was a low-cost hygrometer that measures temperature and relative humidity and costs about $2.50. The second was a commercial moisture metre that costs $170 in USA but provides a more precise reading. Results suggest that the standard BDM auction and both MPL variants produced similar estimates of demand for our moisture testing service. On average, traders were willing to pay $0.28 to have their maize tested with the hygrometer and $0.39 with the moisture metre. An additional take-it-or-leave-it auction for the hygrometer itself revealed that traders were not sensitive to price changes around market price, although only 15% of the traders purchased the device. A service provider model using either device could be a way to make moisture testing accessible in rural grain markets in the absence of a supply chain that sells these devices directly.
{"title":"Estimating Demand for Third-party Quality Testing in Rural Grain Markets: Evidence from an Experimental Auction for Measuring Moisture Content in Kenya","authors":"A. Fuller, Jacob Ricker-Gilbert","doi":"10.1093/JAE/EJAB002","DOIUrl":"https://doi.org/10.1093/JAE/EJAB002","url":null,"abstract":"\u0000 Traders in informal grain markets often lack incentives to sell grain dried to a moisture level that is safe for storage, due to weak regulations and lack of low-cost moisture testing technologies. This study estimated the demand for a third-party moisture testing service in western Kenya that can encourage safe drying and reduce asymmetric information between buyers and sellers. We utilised a Becker–DeGroot–Marschak (BDM) auction to obtain maize traders’ willingness to pay (WTP) for the moisture testing service and compared it with two alternative multiple price list (MPL) mechanisms for eliciting WTP. Traders had the opportunity to bid on the testing service with two different moisture metres. The first was a low-cost hygrometer that measures temperature and relative humidity and costs about $2.50. The second was a commercial moisture metre that costs $170 in USA but provides a more precise reading. Results suggest that the standard BDM auction and both MPL variants produced similar estimates of demand for our moisture testing service. On average, traders were willing to pay $0.28 to have their maize tested with the hygrometer and $0.39 with the moisture metre. An additional take-it-or-leave-it auction for the hygrometer itself revealed that traders were not sensitive to price changes around market price, although only 15% of the traders purchased the device. A service provider model using either device could be a way to make moisture testing accessible in rural grain markets in the absence of a supply chain that sells these devices directly.","PeriodicalId":51524,"journal":{"name":"Journal of African Economies","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2021-03-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44286622","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze the domestic transport and logistics costs of importing a 20-foot container into Africa. We run regressions on a panel of 50 African countries for the period 2006–2014 using the RE-2SLS estimator. Distance from port of arrival to the point of delivery is an important explanatory factor of cost. Time-varying variables yield additional and valuable information. Reducing processing times and adjusting the ratio of the purchasing power parity conversion factor to the market exchange rate would contribute to save on the cost to import.
{"title":"What Factors Drive Transport and Logistics Costs in Africa?","authors":"P. Plane","doi":"10.1093/JAE/EJAA019","DOIUrl":"https://doi.org/10.1093/JAE/EJAA019","url":null,"abstract":"\u0000 We analyze the domestic transport and logistics costs of importing a 20-foot container into Africa. We run regressions on a panel of 50 African countries for the period 2006–2014 using the RE-2SLS estimator. Distance from port of arrival to the point of delivery is an important explanatory factor of cost. Time-varying variables yield additional and valuable information. Reducing processing times and adjusting the ratio of the purchasing power parity conversion factor to the market exchange rate would contribute to save on the cost to import.","PeriodicalId":51524,"journal":{"name":"Journal of African Economies","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2021-02-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45780305","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper investigates the relationship between real incomes in Sub-Saharan African countries during 1990–2018 and child wellbeing. A new UNICEF-WHO-World Bank database of child growth and malnutrition and annual measures of child mortality from the World Development Indicators are employed. Changes in real incomes are related to changes in these measures. Real incomes are found to be strongly negatively conditionally associated with stunting, underweight and child mortality. The fraction of each country’s export revenue derived from major non-agricultural export commodities in 1990 is then used to construct a counterfactual value of export revenues. This measure is used to predict real incomes in a country in a year. The impact of incomes on child mortality outcomes is then assessed. Instrumental variables results suggest that improved incomes may have causally reduced neonatal and under-five mortality.
{"title":"Incomes and Child Health in Sub-Saharan Africa, 1990–2018","authors":"L. Grogan, L. Moers","doi":"10.1093/JAE/EJAA018","DOIUrl":"https://doi.org/10.1093/JAE/EJAA018","url":null,"abstract":"\u0000 This paper investigates the relationship between real incomes in Sub-Saharan African countries during 1990–2018 and child wellbeing. A new UNICEF-WHO-World Bank database of child growth and malnutrition and annual measures of child mortality from the World Development Indicators are employed. Changes in real incomes are related to changes in these measures. Real incomes are found to be strongly negatively conditionally associated with stunting, underweight and child mortality. The fraction of each country’s export revenue derived from major non-agricultural export commodities in 1990 is then used to construct a counterfactual value of export revenues. This measure is used to predict real incomes in a country in a year. The impact of incomes on child mortality outcomes is then assessed. Instrumental variables results suggest that improved incomes may have causally reduced neonatal and under-five mortality.","PeriodicalId":51524,"journal":{"name":"Journal of African Economies","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2021-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41540316","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A. Kamanzi, A. McKay, A. Newell, Cinzia Rienzo, Wiktoria Tafesse
For many decades the worldwide expansion of supply and demand for skilled work has been at the heart of economic growth and development. In this paper, we use the 1991–2010 panel data from the Kagera Health and Development Survey in North West Tanzania to examine the work outcomes at the end of the panel of those who were young (7 to 24 years) in the baseline. First, we illustrate the significant extent to which advanced education and skilled work go hand in hand. We analyse specifically the baseline household factors enabling individuals to access more advanced education, and we find quite different results by gender. We then analyse, again by gender, how this education plus baseline characteristics matter for attaining skilled or professional work. We also study the importance of migration in the process and the degree of intergenerational mobility in skilled work. The results show vividly how some key household factors help young men advance in their education and career, while childcare in particular retards the progress young women can make.
{"title":"Education, Access to Better Quality Work and Gender: Lessons from the Kagera Panel Data Set","authors":"A. Kamanzi, A. McKay, A. Newell, Cinzia Rienzo, Wiktoria Tafesse","doi":"10.1093/jae/ejaa011","DOIUrl":"https://doi.org/10.1093/jae/ejaa011","url":null,"abstract":"\u0000 For many decades the worldwide expansion of supply and demand for skilled work has been at the heart of economic growth and development. In this paper, we use the 1991–2010 panel data from the Kagera Health and Development Survey in North West Tanzania to examine the work outcomes at the end of the panel of those who were young (7 to 24 years) in the baseline. First, we illustrate the significant extent to which advanced education and skilled work go hand in hand. We analyse specifically the baseline household factors enabling individuals to access more advanced education, and we find quite different results by gender. We then analyse, again by gender, how this education plus baseline characteristics matter for attaining skilled or professional work. We also study the importance of migration in the process and the degree of intergenerational mobility in skilled work. The results show vividly how some key household factors help young men advance in their education and career, while childcare in particular retards the progress young women can make.","PeriodicalId":51524,"journal":{"name":"Journal of African Economies","volume":null,"pages":null},"PeriodicalIF":1.6,"publicationDate":"2021-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"https://sci-hub-pdf.com/10.1093/jae/ejaa011","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43551833","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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