Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907740
Ntokozo Patrick Nzimande
ABSTRACT: Convergence is considered a fundamental economic mechanism and a necessary condition for achieving industrial development and market integration as well as socio-economic cohesion in the Southern African Development (SADC) region. The former is the explicit objective of the SADC, as formulated in its Regional Indicative Strategic Development Plan (RISDP). "[A] key priority under this pillar will be ensuring macroeconomic convergence, increased cooperation, and investment". Despite convergence being a crucial ingredient for the proposed integration in the region, there has been limited research on the subject in Africa, particularly, SADC. To bridge this gap, this study sought to investigate per capita income convergence or lack thereof, in the SADC region over the period 1980 to 2017. To this end, we employed the approach proposed by Phillips and Sul (2008), which not only tests for overall convergence but for the possibility of multiple equilibria as well. Relative to the conventional approaches, this approach is superior in many respects. For instance, this technique requires no prior knowledge about possible convergence clusters, that is, the clusters are endogenously determined. Moreover, it imposes no restraints regarding trend stationarity or stochastic non-stationarity. Consequently, our findings are immune from the inefficiencies linked to unit roots or cointegration tests. The findings of the study suggested no overall convergence in the SADC region, but evidence supporting the existence of five convergence clubs, with each cluster converging to its steady-state equilibrium, and one divergent country, Angola. The first club consisted of only the high-income countries in the region, Seychelles, and Mauritius. The second convergence club had two members as well, South Africa and Botswana, whereas the third club consisted of the Kingdom of Eswatini and Namibia. In the fourth club, the identified members are Comoros, which is not included in the previous study because it was recently admitted into the bloc, Lesotho, Malawi, Mozambique, Tanzania, Zambia, and Zimbabwe, while in the fifth club, the members are the Democratic Republic of Congo and Madagascar. The findings of this study have in-depth implications for the development policies in the SADC region. These findings suggest that the region should consider adopting and implementing policies that would explicitly target low-income countries to promote convergence, and thus, create a conducive environment for the proposed monetary union in the SADC bloc.
{"title":"Income Convergence in Southern Africa: A Nonlinear Time-Varying Framework","authors":"Ntokozo Patrick Nzimande","doi":"10.1353/jda.2023.a907740","DOIUrl":"https://doi.org/10.1353/jda.2023.a907740","url":null,"abstract":"ABSTRACT: Convergence is considered a fundamental economic mechanism and a necessary condition for achieving industrial development and market integration as well as socio-economic cohesion in the Southern African Development (SADC) region. The former is the explicit objective of the SADC, as formulated in its Regional Indicative Strategic Development Plan (RISDP). \"[A] key priority under this pillar will be ensuring macroeconomic convergence, increased cooperation, and investment\". Despite convergence being a crucial ingredient for the proposed integration in the region, there has been limited research on the subject in Africa, particularly, SADC. To bridge this gap, this study sought to investigate per capita income convergence or lack thereof, in the SADC region over the period 1980 to 2017. To this end, we employed the approach proposed by Phillips and Sul (2008), which not only tests for overall convergence but for the possibility of multiple equilibria as well. Relative to the conventional approaches, this approach is superior in many respects. For instance, this technique requires no prior knowledge about possible convergence clusters, that is, the clusters are endogenously determined. Moreover, it imposes no restraints regarding trend stationarity or stochastic non-stationarity. Consequently, our findings are immune from the inefficiencies linked to unit roots or cointegration tests. The findings of the study suggested no overall convergence in the SADC region, but evidence supporting the existence of five convergence clubs, with each cluster converging to its steady-state equilibrium, and one divergent country, Angola. The first club consisted of only the high-income countries in the region, Seychelles, and Mauritius. The second convergence club had two members as well, South Africa and Botswana, whereas the third club consisted of the Kingdom of Eswatini and Namibia. In the fourth club, the identified members are Comoros, which is not included in the previous study because it was recently admitted into the bloc, Lesotho, Malawi, Mozambique, Tanzania, Zambia, and Zimbabwe, while in the fifth club, the members are the Democratic Republic of Congo and Madagascar. The findings of this study have in-depth implications for the development policies in the SADC region. These findings suggest that the region should consider adopting and implementing policies that would explicitly target low-income countries to promote convergence, and thus, create a conducive environment for the proposed monetary union in the SADC bloc.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135144592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907735
Raymond Osi Alenoghena, Adolphus Arhotomhenla Aghughu, Ernest Simeon Odior
ABSTRACT: The Nigerian government has borrowed for more than three decades to fund the growing fiscal deficit based on a weak tax revenue base. After the repayment of the country's foreign loans in 2006, the borrowing structure has been dominated by domestic loans. Between 2006 and 2020, domestic borrowing has grown by more than 800 per cent. This study examines the effect of domestic borrowing on Nigeria's macroeconomic variables from 1975 to 1980. The variables examined against the effect of domestic borrowing include economic growth, financial development (broad money supply and credit to private sector), external borrowing, interest rate, inflation, industrial production, private investment, trade openness and population growth rate. The study utilised the Bayesian Vector Autoregressive (BVAR) model. The BVAR approach gives more realistic estimations than other VAR models as it considers prior information steady states during analysis. The study also adopts the Cholesky impulse response function and variance decomposition approach in the investigation. The study found a long-run equilibrium relationship between domestic borrowing and other macroeconomic variables. Also, domestic borrowing positively and significantly affected economic growth, industrial production and inflation. However, domestic borrowing negatively and significantly affects trade openness. Although the effect of domestic borrowing on the financial development variables (broad money supply and credit to the private sector) is negative, it is insignificant. The Bayesian VAR impulse response simulation demonstrates that the fiscal policy shock from domestic borrowing impacts the macroeconomic variables in line with the estimated regression results. As a follow-up, the variance decomposition results show that the decomposition of the shocks from government domestic borrowing is borne more by external borrowing, broad money supply and interest rate in the order of magnitude. The study recommends a restriction in monetary policy to benchmark and closely checkmate the aggressive spending from domestic borrowing. Also, the Nigerian government should improve investment in infrastructure to enhance private sector productivity and expand taxes revenue base to mitigate the reliance on borrowing as a source of funding for fiscal deficit. Furthermore, the country's productivity must be coordinated by the government to expand the sources of foreign exchange earnings to enhance stability in the country's external sector.
{"title":"Domestic Borrowing and the Nigerian Economy: A Bayesian VAR Analysis","authors":"Raymond Osi Alenoghena, Adolphus Arhotomhenla Aghughu, Ernest Simeon Odior","doi":"10.1353/jda.2023.a907735","DOIUrl":"https://doi.org/10.1353/jda.2023.a907735","url":null,"abstract":"ABSTRACT: The Nigerian government has borrowed for more than three decades to fund the growing fiscal deficit based on a weak tax revenue base. After the repayment of the country's foreign loans in 2006, the borrowing structure has been dominated by domestic loans. Between 2006 and 2020, domestic borrowing has grown by more than 800 per cent. This study examines the effect of domestic borrowing on Nigeria's macroeconomic variables from 1975 to 1980. The variables examined against the effect of domestic borrowing include economic growth, financial development (broad money supply and credit to private sector), external borrowing, interest rate, inflation, industrial production, private investment, trade openness and population growth rate. The study utilised the Bayesian Vector Autoregressive (BVAR) model. The BVAR approach gives more realistic estimations than other VAR models as it considers prior information steady states during analysis. The study also adopts the Cholesky impulse response function and variance decomposition approach in the investigation. The study found a long-run equilibrium relationship between domestic borrowing and other macroeconomic variables. Also, domestic borrowing positively and significantly affected economic growth, industrial production and inflation. However, domestic borrowing negatively and significantly affects trade openness. Although the effect of domestic borrowing on the financial development variables (broad money supply and credit to the private sector) is negative, it is insignificant. The Bayesian VAR impulse response simulation demonstrates that the fiscal policy shock from domestic borrowing impacts the macroeconomic variables in line with the estimated regression results. As a follow-up, the variance decomposition results show that the decomposition of the shocks from government domestic borrowing is borne more by external borrowing, broad money supply and interest rate in the order of magnitude. The study recommends a restriction in monetary policy to benchmark and closely checkmate the aggressive spending from domestic borrowing. Also, the Nigerian government should improve investment in infrastructure to enhance private sector productivity and expand taxes revenue base to mitigate the reliance on borrowing as a source of funding for fiscal deficit. Furthermore, the country's productivity must be coordinated by the government to expand the sources of foreign exchange earnings to enhance stability in the country's external sector.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135145114","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907744
Khatibu Kazungu, Frank E. Njau
ABSTRACT: Over the last decade or so, Tanzania's economy has registered a significant growth in the rate of financial inclusion. The level of financial exclusion has consistently declined from 55% to 28% between 2009 and 2017 respectively. Moreover, the percentage of the adult population using formal financial services has almost quadrupled between 2009 and 2017. However, available statistics also illustrate that the participation of youth population in the formal banking, insurance, credit and savings products and services remain abysmally low. Furthermore, less than 50 percent of youth borrow from formal financial institutions. Indeed, lack of access to finance is frequently singled out as the major obstacle among youth to engage in entrepreneurial activities. Although much has been done to address financial inclusion, relatively little is known about the determinants of youth financial inclusion as well as the impact of financial inclusion on youth's willingness to engage in entrepreneurship in Tanzania. This study uses World Bank Financial Inclusion Index, (2018) to examine both the determinants of financial inclusion and the effects of financial inclusion on youth willingness to engage in entrepreneurial activities in Tanzania. In doing so, we employ propensity scores matching (PSM) and the treatment effects models. Financial inclusion is measured by using three indicators namely; "formal account", "formal savings" and "formal credit". The results from the logit PSM regression indicate that being employed increases the likelihood of having a current account or a savings account in a formal financial institution amongst the young people. In the case of formal account and formal saving, attaining a secondary education level increases the probability of having a formal account and a formal saving account relative to those with primary education. The estimated results from the Average Treatment Effect, whose computation is built on the propensity scores and the kernel matching algorithm show that having a formal current account, formal saving account and access to formal credit services positively affect the willingness of youths to engage into entrepreneurship. The policy implication is that government policy that enhances expansion of credit to youth remains paramount as a panacea to engage youth in entrepreneurial activities.
{"title":"Determinants of Youth Financial Inclusion and Their Willingness to Become Entrepreneurs in Tanzania","authors":"Khatibu Kazungu, Frank E. Njau","doi":"10.1353/jda.2023.a907744","DOIUrl":"https://doi.org/10.1353/jda.2023.a907744","url":null,"abstract":"ABSTRACT: Over the last decade or so, Tanzania's economy has registered a significant growth in the rate of financial inclusion. The level of financial exclusion has consistently declined from 55% to 28% between 2009 and 2017 respectively. Moreover, the percentage of the adult population using formal financial services has almost quadrupled between 2009 and 2017. However, available statistics also illustrate that the participation of youth population in the formal banking, insurance, credit and savings products and services remain abysmally low. Furthermore, less than 50 percent of youth borrow from formal financial institutions. Indeed, lack of access to finance is frequently singled out as the major obstacle among youth to engage in entrepreneurial activities. Although much has been done to address financial inclusion, relatively little is known about the determinants of youth financial inclusion as well as the impact of financial inclusion on youth's willingness to engage in entrepreneurship in Tanzania. This study uses World Bank Financial Inclusion Index, (2018) to examine both the determinants of financial inclusion and the effects of financial inclusion on youth willingness to engage in entrepreneurial activities in Tanzania. In doing so, we employ propensity scores matching (PSM) and the treatment effects models. Financial inclusion is measured by using three indicators namely; \"formal account\", \"formal savings\" and \"formal credit\". The results from the logit PSM regression indicate that being employed increases the likelihood of having a current account or a savings account in a formal financial institution amongst the young people. In the case of formal account and formal saving, attaining a secondary education level increases the probability of having a formal account and a formal saving account relative to those with primary education. The estimated results from the Average Treatment Effect, whose computation is built on the propensity scores and the kernel matching algorithm show that having a formal current account, formal saving account and access to formal credit services positively affect the willingness of youths to engage into entrepreneurship. The policy implication is that government policy that enhances expansion of credit to youth remains paramount as a panacea to engage youth in entrepreneurial activities.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135145251","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907742
Rezwanul Hoque, Sharif M. Hossain, Nur-E-Alom Siddique
ABSTRACT: South Asia, the home to around one-fourth of the world's total population, and the fastest-growing region of the world, achieved an annual average GDP growth rate of 6.6 percent in 2015–2019. During the same period, it also demonstrated a modest share of gross domestic savings and fixed capital formation to GDP. The region has also experienced a considerable success in improving its level of financial inclusion. Within a span of only six years, the number of adults having an account in a formal financial institution increased to 38 percentage points in 2017, though large heterogeneity across countries exists. Despite these economic and financial developments, around half of the world's multidimensionally poor people live in this region. The region is also relatively less inclusive than those of high-income countries, as it excluded 30 percent of its adult population from the formal financial system in 2017. To accelerate its ongoing economic development and poverty reduction, further improvement of the level of financial inclusion is a particular concern in South Asia. However, we know very little about factors influencing financial inclusion in this region. In this paper, we examine the determinants of financial inclusion in South Asia using the World Bank's Global Findex database for the year 2017. Our probit estimations show that being a male, richer, more educated, and older are associated with higher levels of formal account and formal saving. While age and education affect formal credit in a similar manner, we find no significant association between gender and income level with formal credit. We also investigate how individual characteristics are associated with the barriers to financial inclusion and find that women exclude themselves from financial inclusion because other family member might have an account. Documentation and having accounts by other family members are the main factors of financial exclusion of the younger people, while cost and religious reasons discourage older people from having a bank account. Finally, we compare the determinants of informal financial services with those of formal financial services. Our findings have certain policy implications to include financially excluded people, i.e. poor, less educated, youth, and women, into financial network vis-à-vis promoting financial inclusion in South Asia.
{"title":"Financial Inclusion and its Determinants: Empirical Evidence from South Asia","authors":"Rezwanul Hoque, Sharif M. Hossain, Nur-E-Alom Siddique","doi":"10.1353/jda.2023.a907742","DOIUrl":"https://doi.org/10.1353/jda.2023.a907742","url":null,"abstract":"ABSTRACT: South Asia, the home to around one-fourth of the world's total population, and the fastest-growing region of the world, achieved an annual average GDP growth rate of 6.6 percent in 2015–2019. During the same period, it also demonstrated a modest share of gross domestic savings and fixed capital formation to GDP. The region has also experienced a considerable success in improving its level of financial inclusion. Within a span of only six years, the number of adults having an account in a formal financial institution increased to 38 percentage points in 2017, though large heterogeneity across countries exists. Despite these economic and financial developments, around half of the world's multidimensionally poor people live in this region. The region is also relatively less inclusive than those of high-income countries, as it excluded 30 percent of its adult population from the formal financial system in 2017. To accelerate its ongoing economic development and poverty reduction, further improvement of the level of financial inclusion is a particular concern in South Asia. However, we know very little about factors influencing financial inclusion in this region. In this paper, we examine the determinants of financial inclusion in South Asia using the World Bank's Global Findex database for the year 2017. Our probit estimations show that being a male, richer, more educated, and older are associated with higher levels of formal account and formal saving. While age and education affect formal credit in a similar manner, we find no significant association between gender and income level with formal credit. We also investigate how individual characteristics are associated with the barriers to financial inclusion and find that women exclude themselves from financial inclusion because other family member might have an account. Documentation and having accounts by other family members are the main factors of financial exclusion of the younger people, while cost and religious reasons discourage older people from having a bank account. Finally, we compare the determinants of informal financial services with those of formal financial services. Our findings have certain policy implications to include financially excluded people, i.e. poor, less educated, youth, and women, into financial network vis-à-vis promoting financial inclusion in South Asia.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135143154","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907745
Alexander Bilson Darku, William Baah-Boateng, Ibrahim Mohammed, Wassiuw Abdul Rahaman
ABSTRACT: Several studies have used various datasets and methodologies to analyze the relationship between bilateral trade and income convergence among trading partners. However, most studies have not paid attention to the effect that income levels and nature of bilateral trade have on the speed of income convergence. In this paper, we argue that the income levels of trading partners and the nature of bilateral trade play important role in the relationship between bilateral trade and international income convergence. To account for the effect of income levels of trading partners, this paper presents an approach that explicitly accounts for bilateral trade among high-income (OECD) countries, bilateral trade between high-income and low-income (SSA) countries, and bilateral trade among low-income (SSA) countries. We also used total trade data for 25 OECD countries and 30 Sub-Saharan African countries over the period 1980-2018 to avoid the potential bias for selecting certain countries based on arbitrary percentage of trade relationship. We used the 2SLS estimations technique to avoid endogeneity problems due to the nature of the dataset. The paper finds that the bilateral trade-income convergence relationship for OECD to SSA is the strongest. This result throws light on the claim that the nature of bilateral trade between high-income and low-income countries promotes one directional knowledge spillover from high-income to low-income countries which enables low-income countries to adopt new technologies and grow faster than their high-income counterparts. Also, bilateral trade among OECD countries, which mostly comprises of differentiated products, promotes descent income convergence among them. However, bilateral trade among SSA countries has the least effect on income convergence. Findings of the study have important implications for bilateral trade among low-income countries and between low income and high income countries. First, if SSA countries want to develop and catch up with their rich counterparts, they should continue to promote free trade with high income countries by dismantling remaining protection policies. Second, the African Continental Free Trade Area's (AfCFTA) efforts to boost the manufacturing sector through industrialization is in the right direction to promote the production of more differentiated products in Africa which will create growth in income for member countries as they trade more. Finally, there is the need for SSA countries to increase investment rates and improve human capital accumulation to enable them to accelerate the adoption of new technologies and grow faster than their high-income counterparts, while bridging the income gap between them through trade.
{"title":"Sorting Out the Bilateral Trade and Income Convergence Relationship: Does Income and the Nature of Bilateral Trade Matter?","authors":"Alexander Bilson Darku, William Baah-Boateng, Ibrahim Mohammed, Wassiuw Abdul Rahaman","doi":"10.1353/jda.2023.a907745","DOIUrl":"https://doi.org/10.1353/jda.2023.a907745","url":null,"abstract":"ABSTRACT: Several studies have used various datasets and methodologies to analyze the relationship between bilateral trade and income convergence among trading partners. However, most studies have not paid attention to the effect that income levels and nature of bilateral trade have on the speed of income convergence. In this paper, we argue that the income levels of trading partners and the nature of bilateral trade play important role in the relationship between bilateral trade and international income convergence. To account for the effect of income levels of trading partners, this paper presents an approach that explicitly accounts for bilateral trade among high-income (OECD) countries, bilateral trade between high-income and low-income (SSA) countries, and bilateral trade among low-income (SSA) countries. We also used total trade data for 25 OECD countries and 30 Sub-Saharan African countries over the period 1980-2018 to avoid the potential bias for selecting certain countries based on arbitrary percentage of trade relationship. We used the 2SLS estimations technique to avoid endogeneity problems due to the nature of the dataset. The paper finds that the bilateral trade-income convergence relationship for OECD to SSA is the strongest. This result throws light on the claim that the nature of bilateral trade between high-income and low-income countries promotes one directional knowledge spillover from high-income to low-income countries which enables low-income countries to adopt new technologies and grow faster than their high-income counterparts. Also, bilateral trade among OECD countries, which mostly comprises of differentiated products, promotes descent income convergence among them. However, bilateral trade among SSA countries has the least effect on income convergence. Findings of the study have important implications for bilateral trade among low-income countries and between low income and high income countries. First, if SSA countries want to develop and catch up with their rich counterparts, they should continue to promote free trade with high income countries by dismantling remaining protection policies. Second, the African Continental Free Trade Area's (AfCFTA) efforts to boost the manufacturing sector through industrialization is in the right direction to promote the production of more differentiated products in Africa which will create growth in income for member countries as they trade more. Finally, there is the need for SSA countries to increase investment rates and improve human capital accumulation to enable them to accelerate the adoption of new technologies and grow faster than their high-income counterparts, while bridging the income gap between them through trade.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135144593","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907738
Ahmed Nawaz Hakro, Yaseen Ghulam, Shabbar Jaffry, Vyoma Shah
ABSTRACT: In this paper, we investigate the wage differentials that exist in the post-liberalized labor market in Pakistan. The increasing wage differential contradicts standard labor theories and models. The literature also confirms the existence of wage differentials across different labor markets both in industrialized and non-industrialized countries. The firms compensate the workers both on their observable and unobservable characteristics. The mincer equation used in its semi-logarithmic decomposed form to derive wage differentials. The weighted adjusted standard deviation technique is used for further decomposition of the level and regional variations in sectoral wage gaps, as suggested by Horrace and Oaxaca. The sectoral heterogeneity, skill characteristics and regional dispersions derived by using the micro labor force data sets spread over thirty years. The results confirm the existence of inter-industry wage differentials. However, the size varies across the regions, levels of education, and types of occupations. A substantial difference in the wage gap observed in firms both in the formal and informal sectors. The financial services firms pay higher than the average national wage followed by firms in utility services, the services sector, and the mining sector. The firms in the agricultural sector pay lower than the average national wage. The dispersion in wages has risen to the magnitude of almost 25 percent over the last three decades. Firms pay higher wages to high-skill workers, while industries requiring jobs with low skills pay lower wages. The wage differentials in various regions are attributable to the persistent and relative backwardness of provinces. The high-skilled occupations in general are likely to have more benefits than those involving low-skilled workers. Individual and household characteristics account for almost 50 percent of variation regardless of the sectoral affiliation. The increase in the minimum wage, with targeted social policies in educational attainment, increased participation of women, and provision of social services in the informal sector may reduce the gap in wage difference.
{"title":"Wage Differentials in the Post Liberalized Labor Market in Paksitan","authors":"Ahmed Nawaz Hakro, Yaseen Ghulam, Shabbar Jaffry, Vyoma Shah","doi":"10.1353/jda.2023.a907738","DOIUrl":"https://doi.org/10.1353/jda.2023.a907738","url":null,"abstract":"ABSTRACT: In this paper, we investigate the wage differentials that exist in the post-liberalized labor market in Pakistan. The increasing wage differential contradicts standard labor theories and models. The literature also confirms the existence of wage differentials across different labor markets both in industrialized and non-industrialized countries. The firms compensate the workers both on their observable and unobservable characteristics. The mincer equation used in its semi-logarithmic decomposed form to derive wage differentials. The weighted adjusted standard deviation technique is used for further decomposition of the level and regional variations in sectoral wage gaps, as suggested by Horrace and Oaxaca. The sectoral heterogeneity, skill characteristics and regional dispersions derived by using the micro labor force data sets spread over thirty years. The results confirm the existence of inter-industry wage differentials. However, the size varies across the regions, levels of education, and types of occupations. A substantial difference in the wage gap observed in firms both in the formal and informal sectors. The financial services firms pay higher than the average national wage followed by firms in utility services, the services sector, and the mining sector. The firms in the agricultural sector pay lower than the average national wage. The dispersion in wages has risen to the magnitude of almost 25 percent over the last three decades. Firms pay higher wages to high-skill workers, while industries requiring jobs with low skills pay lower wages. The wage differentials in various regions are attributable to the persistent and relative backwardness of provinces. The high-skilled occupations in general are likely to have more benefits than those involving low-skilled workers. Individual and household characteristics account for almost 50 percent of variation regardless of the sectoral affiliation. The increase in the minimum wage, with targeted social policies in educational attainment, increased participation of women, and provision of social services in the informal sector may reduce the gap in wage difference.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135144594","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907743
Janesh Sami
ABSTRACT: The changing dynamics of tax revenue and its responses to domestic and external shocks play a pivotal role in the discussion of the sustainability of public finance in small developing economies. However, the empirical literature on the response of tax revenue to various shocks in developing economies in the Pacific is sparse. Despite several tax reforms over the last decade, the spending plans of the Fijian government since the 2017/2018 budget announcements have stimulated frequent public discussions regarding the sustainability of public debt. Against this background, the main purpose of this paper is to investigate the response of tax revenue in Fiji - a small developing island economy, to external and domestic shocks using historical annual data covering more than five decades. This study uses unit root tests that account for single and multiple endogenous structural breaks and finds that tax revenue in Fiji is a non-stationary process, I (1) with break dates coinciding with tax reforms, general elections, and political coups. The findings reveal that tax reforms and political developments are possible important sources of shocks to tax revenue and have important policy implications. First, shocks to tax revenue will have persistent effects, with the effects of adverse shocks being transmitted to other related variables and sectors of the Fijian economy. Second, historical values of tax revenue cannot be used to formulate forecasts of tax revenue and policymakers should consider other determinants of tax revenue (for example, the share of the agriculture sector, trade volume, political stability, education, life expectancy, infant mortality rates, age composition of the population, urbanization, inflation rate, and corruption) for forecasting purposes. The evidence of non-stationarity indicates that future studies on tax revenue need to carefully reflect on the modeling technique to avoid spurious regressions. Furthermore, our findings reveal that temporary fiscal measures will not have a permanent effect on tax revenue and sustainable revenue growth requires focusing on long-term (rather than short-sighted) reforms. Thus, our findings underscore the importance of evidence-based policy reforms to improve the resilience, efficiency, and sustainability of the tax system in Fiji to shelter it from future adverse shocks.
{"title":"Tax Reforms, Structural Breaks, and Dynamics of Tax Revenue in Fiji","authors":"Janesh Sami","doi":"10.1353/jda.2023.a907743","DOIUrl":"https://doi.org/10.1353/jda.2023.a907743","url":null,"abstract":"ABSTRACT: The changing dynamics of tax revenue and its responses to domestic and external shocks play a pivotal role in the discussion of the sustainability of public finance in small developing economies. However, the empirical literature on the response of tax revenue to various shocks in developing economies in the Pacific is sparse. Despite several tax reforms over the last decade, the spending plans of the Fijian government since the 2017/2018 budget announcements have stimulated frequent public discussions regarding the sustainability of public debt. Against this background, the main purpose of this paper is to investigate the response of tax revenue in Fiji - a small developing island economy, to external and domestic shocks using historical annual data covering more than five decades. This study uses unit root tests that account for single and multiple endogenous structural breaks and finds that tax revenue in Fiji is a non-stationary process, I (1) with break dates coinciding with tax reforms, general elections, and political coups. The findings reveal that tax reforms and political developments are possible important sources of shocks to tax revenue and have important policy implications. First, shocks to tax revenue will have persistent effects, with the effects of adverse shocks being transmitted to other related variables and sectors of the Fijian economy. Second, historical values of tax revenue cannot be used to formulate forecasts of tax revenue and policymakers should consider other determinants of tax revenue (for example, the share of the agriculture sector, trade volume, political stability, education, life expectancy, infant mortality rates, age composition of the population, urbanization, inflation rate, and corruption) for forecasting purposes. The evidence of non-stationarity indicates that future studies on tax revenue need to carefully reflect on the modeling technique to avoid spurious regressions. Furthermore, our findings reveal that temporary fiscal measures will not have a permanent effect on tax revenue and sustainable revenue growth requires focusing on long-term (rather than short-sighted) reforms. Thus, our findings underscore the importance of evidence-based policy reforms to improve the resilience, efficiency, and sustainability of the tax system in Fiji to shelter it from future adverse shocks.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135145117","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ABSTRACT: The study is an exploratory attempt to assess the relationship between individuals' objective class position and subjective social positions in the South African hierarchy. While objective class dynamics have received much attention in South Africa, less is known about the subjective social position individuals place themselves. The study aims to make use of the International Social Survey Program (ISSP) dataset and assess the relationship between objective and subjective class positions in South Africa. The results show considerable variation between objective and subjective class positions, with a strong middling tendency among all objective class groups in South Africa. The study also shows that this middling tendency has increased in the last decade in South Africa, predominantly due to individuals overestimating their social positions. With a large share of South Africans living close or below the poverty line, there is a clear biasedness of South Africans placing themselves in the middle of society, deviating from their lower objective position. The study further measures the variation between objective and subjective social positions to create a novel class scheme of inflated, deflated, and concordant class perceptions. These biased perceptions are then compared to socio-economic characteristics, showing that gender, race, and education are closely related to bias perceptions in South Africa. Furthermore, the increasing nature of high inequality and social unrest events in South Africa prompts the study also to assess the different social and political attitudes by varying objective and subjective class schemes. The results show that among the subjective class identification, individuals in higher perceived class positions tend to be less angered towards inequality, have lower redistribution preferences, and perceive a weaker conflict between the rich and the poor. These results confirm the impact perceived social positions and biased perceptions could have on social and political attitudes in South Africa. Attitudes that have been considered relevant in voting behavior and social policy formulation models. The results of the paper provides some vital information for policy makers on the dynamics behind subjective class and bias perceptions in South Africa.
{"title":"The Variation Between Subjective and Objective Class Positions in South Africa. The Distance Between Perception and Reality","authors":"Frederich Kirsten, Mduduzi Biyase, Ilse Botha, Marinda Pretorius","doi":"10.1353/jda.2023.a907750","DOIUrl":"https://doi.org/10.1353/jda.2023.a907750","url":null,"abstract":"ABSTRACT: The study is an exploratory attempt to assess the relationship between individuals' objective class position and subjective social positions in the South African hierarchy. While objective class dynamics have received much attention in South Africa, less is known about the subjective social position individuals place themselves. The study aims to make use of the International Social Survey Program (ISSP) dataset and assess the relationship between objective and subjective class positions in South Africa. The results show considerable variation between objective and subjective class positions, with a strong middling tendency among all objective class groups in South Africa. The study also shows that this middling tendency has increased in the last decade in South Africa, predominantly due to individuals overestimating their social positions. With a large share of South Africans living close or below the poverty line, there is a clear biasedness of South Africans placing themselves in the middle of society, deviating from their lower objective position. The study further measures the variation between objective and subjective social positions to create a novel class scheme of inflated, deflated, and concordant class perceptions. These biased perceptions are then compared to socio-economic characteristics, showing that gender, race, and education are closely related to bias perceptions in South Africa. Furthermore, the increasing nature of high inequality and social unrest events in South Africa prompts the study also to assess the different social and political attitudes by varying objective and subjective class schemes. The results show that among the subjective class identification, individuals in higher perceived class positions tend to be less angered towards inequality, have lower redistribution preferences, and perceive a weaker conflict between the rich and the poor. These results confirm the impact perceived social positions and biased perceptions could have on social and political attitudes in South Africa. Attitudes that have been considered relevant in voting behavior and social policy formulation models. The results of the paper provides some vital information for policy makers on the dynamics behind subjective class and bias perceptions in South Africa.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135145112","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907737
Isiaka Akande Raifu, Alarudeen Aminu
ABSTRACT: Understanding the relationship between output and unemployment (Okun's law) is important for policymakers, particularly during crises. One of the aspects of Okun's law that is commonly examined during crises is the structural stability and behavior of Okun's law over the business cycle. While this issue has been addressed empirically in developed countries, little is known about it in developing countries such as South Africa. Hence, this study examines the structural stability and behavior of Okun's law over the business cycle in South Africa. This study adopts both the difference and gap methods of formalizing Okun's law to implement its objectives. The recursive rolling window method was used to test the structural stability of Okun's law over time. The behavior of Okun's law over the business cycle is examined using the Markov-switching regression method. This study was conducted using the data from 1994Q1 to 2021Q1. The results of this study show that Okun's law varies over the business cycle because the response of unemployment to economic expansion is quite different from that of economic contraction. Okun's law holds during economic expansion but fails to hold during an economic recession. Evidence from this study also reveals that the coefficients of Okun's law vary over time. For instance, in the case of the difference method, Okun's coefficients range from 0.063 to 1.221 in absolute terms. For the gap method, especially when the H-P filtering method is applied, Okun's coefficients range from 0.509 to 9.412 in absolute terms. In summary, the findings from this study suggest that cyclical unemployment responds more significantly to cyclical output growth than the response of changes in unemployment to changes in output. In addition, this study proves that Okun's law is unstable over time in South Africa. These findings imply a high degree of variability between the labor and goods markets in the country. Hence, policies must be designed to harmonize the divergence between the two markets. This will require the implementation of macroeconomic policies such as fiscal and monetary policies. From a fiscal policy perspective, the government should reduce taxes or provide tax holidays to firms. The interest rate should be set low in the case of monetary policy.
{"title":"Testing Okun's Law Over the Business Cycle: The Case of South Africa","authors":"Isiaka Akande Raifu, Alarudeen Aminu","doi":"10.1353/jda.2023.a907737","DOIUrl":"https://doi.org/10.1353/jda.2023.a907737","url":null,"abstract":"ABSTRACT: Understanding the relationship between output and unemployment (Okun's law) is important for policymakers, particularly during crises. One of the aspects of Okun's law that is commonly examined during crises is the structural stability and behavior of Okun's law over the business cycle. While this issue has been addressed empirically in developed countries, little is known about it in developing countries such as South Africa. Hence, this study examines the structural stability and behavior of Okun's law over the business cycle in South Africa. This study adopts both the difference and gap methods of formalizing Okun's law to implement its objectives. The recursive rolling window method was used to test the structural stability of Okun's law over time. The behavior of Okun's law over the business cycle is examined using the Markov-switching regression method. This study was conducted using the data from 1994Q1 to 2021Q1. The results of this study show that Okun's law varies over the business cycle because the response of unemployment to economic expansion is quite different from that of economic contraction. Okun's law holds during economic expansion but fails to hold during an economic recession. Evidence from this study also reveals that the coefficients of Okun's law vary over time. For instance, in the case of the difference method, Okun's coefficients range from 0.063 to 1.221 in absolute terms. For the gap method, especially when the H-P filtering method is applied, Okun's coefficients range from 0.509 to 9.412 in absolute terms. In summary, the findings from this study suggest that cyclical unemployment responds more significantly to cyclical output growth than the response of changes in unemployment to changes in output. In addition, this study proves that Okun's law is unstable over time in South Africa. These findings imply a high degree of variability between the labor and goods markets in the country. Hence, policies must be designed to harmonize the divergence between the two markets. This will require the implementation of macroeconomic policies such as fiscal and monetary policies. From a fiscal policy perspective, the government should reduce taxes or provide tax holidays to firms. The interest rate should be set low in the case of monetary policy.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135143152","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2023-06-01DOI: 10.1353/jda.2023.a907748
Gavriilidis Gaby, Theodore Metaxas
ABSTRACT: The aim of this study was to measure the impacts of COVID-19 on tourism entrepreneurs and business owners in Greece. For that purpose, electronic questionnaires were distributed to 548 tourism professionals coming from the domestic hotel, culinary, and travel agencies sectors. Furthermore, responses came from almost all the major tourist destinations of the country. The analysis of the data included several statistical techniques such as Factor Analysis, Parametric Tests (Independent T-tests and one-way ANOVA), Mediation and Bootstrap analyses. The results indicated that COVID-19 is expected to reshape Greece's tourism model, calling authorities to apply certain development policies for limiting the negative consequences of the new virus in the domestic tourism sector and in the national economy in general. Moreover, the impact of COVID-19 is differentiated on a firm and on a personal level. Firstly, small firms that operate in the culinary sector were more vulnerable to the effects of the pandemic. Likewise, persons with lower educational backgrounds and women were also more impacted by COVID-19 outbreak. In this context, policies for recovery should focus in reducing inequalities in the domestic tourism industry and strengthening social cohesion, moving towards more sustainable tourism models. The results are expected to help tourism authorities and local actors in Greece to take measures and apply policies for addressing effectively the problems that occurred in the domestic tourism industry due to the COVID-19 outbreak, aiming to enhance sustainability in the sector. Considering the importance that tourism plays for the Greek economy in terms of employment and turnover, addressing the problems of the pandemic gains growing importance. Lastly, the problems that arise from the research, which concern tourism professionals will assist state authorities to take immediate measures to support entrepreneurship and to ensure that tourism will remain the most dynamic sector of the Greek economy in the post-COVID-19 era.
{"title":"Measuring the Impact of COVID-19 on Tourism Entrepreneurs and Businesses in Greece: Some Empirical Evidence","authors":"Gavriilidis Gaby, Theodore Metaxas","doi":"10.1353/jda.2023.a907748","DOIUrl":"https://doi.org/10.1353/jda.2023.a907748","url":null,"abstract":"ABSTRACT: The aim of this study was to measure the impacts of COVID-19 on tourism entrepreneurs and business owners in Greece. For that purpose, electronic questionnaires were distributed to 548 tourism professionals coming from the domestic hotel, culinary, and travel agencies sectors. Furthermore, responses came from almost all the major tourist destinations of the country. The analysis of the data included several statistical techniques such as Factor Analysis, Parametric Tests (Independent T-tests and one-way ANOVA), Mediation and Bootstrap analyses. The results indicated that COVID-19 is expected to reshape Greece's tourism model, calling authorities to apply certain development policies for limiting the negative consequences of the new virus in the domestic tourism sector and in the national economy in general. Moreover, the impact of COVID-19 is differentiated on a firm and on a personal level. Firstly, small firms that operate in the culinary sector were more vulnerable to the effects of the pandemic. Likewise, persons with lower educational backgrounds and women were also more impacted by COVID-19 outbreak. In this context, policies for recovery should focus in reducing inequalities in the domestic tourism industry and strengthening social cohesion, moving towards more sustainable tourism models. The results are expected to help tourism authorities and local actors in Greece to take measures and apply policies for addressing effectively the problems that occurred in the domestic tourism industry due to the COVID-19 outbreak, aiming to enhance sustainability in the sector. Considering the importance that tourism plays for the Greek economy in terms of employment and turnover, addressing the problems of the pandemic gains growing importance. Lastly, the problems that arise from the research, which concern tourism professionals will assist state authorities to take immediate measures to support entrepreneurship and to ensure that tourism will remain the most dynamic sector of the Greek economy in the post-COVID-19 era.","PeriodicalId":84983,"journal":{"name":"Journal Of Developing Areas","volume":"124 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135143155","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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