Journal of African Economies - current issue

Technical Efficiency Analysis of Micro-enterprises: Theoretical and Methodological Approach of the Stochastic Frontier Production Functions Applied to Nigerian Data

Ajibefun, I. A. — 2008-02-27

This study was carried out to analyse the technical efficiency of micro-enterprises in the Nigerian economy, using cross-sectional data collected on micro-enterprises selected from block-making, metal-fabricating and sawmilling enterprises in the three geographical regions (north, southwest and southeast regions) of Nigeria. The Nigerian government has put in efforts at promoting productivity and efficiency in both public and private sectors of the economy. The ability of Nigerian economy to experience accelerated economic growth both in the short and in the long run depends on the exploitation of the potential within the micro-enterprises sector of the economy. The importance of this sector is reflected in the current economic reform programme of the Federal Government of Nigeria under the National Economic Empowerment Development Strategy (NEEDS). NEEDS is a comprehensive two- to three-year economic growth and poverty reduction plan. It then becomes important to study the current level of technical efficiency within the micro-enterprises sub-sector. Data collected were analysed using the stochastic frontier production functions. The results of the analysis show that the enterprises have varying level of technical efficiencies across enterprises, across scales of operation and across regions. Of the three geographical regions, both the least and the highest technical efficiencies come from micro-enterprises located in the southeastern regions of Nigeria. The mean technical efficiencies range between 0.66 for sawmilling enterprises and 0.82 for metal-fabricating enterprises. The results indicate that while the level of education, level of investment and number of employees positively and significantly affect the level of technical efficiency, age of enterprise, as well as age of enterprise operator/decision-maker, negatively influences the level of technical efficiency. The results of tests of hypotheses show that there is no significant difference in technical efficiency across the scale of operation, but the hypothesis of no significant difference in technical efficiency across geographical zones is rejected.

Risk and Schooling Decisions in Rural Madagascar: A Panel Data-Analysis

Gubert, F., Robilliard, A.-S. — 2008-02-27

Most households in rural Madagascar are engaged in agriculture and derive a large share of their income from the production of food or cash crops and from animal husbandry. However, agricultural yields can be extremely volatile due to weather conditions, pests, insects, rodents and other calamities. As a result, households record large fluctuations in their incomes that must be dealt with. Since the usual consumption-smoothing market mechanisms are quite limited in the Malagasy context, households need to rely on non-market mechanisms or to adopt multi-faceted strategies to cope with risk. In this paper, we examine the possibility that parents obtain informal income insurance by letting their children work. We test this hypothesis by examining the relationship between household income shocks and human capital investment in children. In particular, we investigate whether children's propensity to join school and to drop out of school responds to transient shocks. We also investigate issues such as gender and intrahousehold resource allocation.

Are Poor, Remote Areas Left behind in Agricultural Development: The Case of Tanzania

Minot, N. — 2008-02-27

The conventional wisdom in Africa is that economic reforms may have stimulated economic growth, but the benefits of this growth have been uneven, favoring urban households and farmers with good market access. This idea, although quite plausible, has rarely been tested empirically. In this paper, we develop a new approach to measuring trends in poverty and inequality and apply it to Tanzania in order to explore the relationship between rural poverty and market access. We find that, between 1991/92 and 2003, poverty fell the least in Dar es Salaam and the most in rural areas. Rural poverty is related to remoteness, but the relationship is surprisingly weak and it varies depending on the definition used. We find little evidence that remote rural areas are being "left behind", either in relative or in absolute terms.

Using a Contingent Valuation Approach for Improved Solid Waste Management Facility: Evidence from Enugu State, Nigeria

Fonta, W. M., Ichoku, H. E., Ogujiuba, K. K., Chukwu, J. O. — 2008-02-27

For most public projects, especially environmental projects that are partly funded by multilateral donor agencies, cost–benefit analysis has become a routine procedure for the approval of project funds. These agencies are very keen to know whether the target community or country possesses the aggregate willingness to pay for the project. The two most commonly applied techniques for such analysis are stated preference and behavioural techniques. In this study, we employ the contingent valuation method (CVM), the most widely applicable of the stated preference methods, to establish empirical grounds for pricing the services of a new solid waste management (SWM) improvement facility in Enugu State, Nigeria, initiated by the UK Department for International Development, the State's Environmental Protection Agency, and State and Local Government Programme. We find that CVM can be fruitfully used to support the design and implementation of new SWM facilities and that analysis of the valuation function can give qualitative information that is difficult to identify using baseline surveys or most conventional economic valuation techniques.

Learning to Export: Evidence from Moroccan Manufacturing

Fafchamps, M., El Hamine, S., Zeufack, A. — 2008-02-27

This paper tests two alternative models of selection into export: lower costs and better market familiarity. Both are potentially subject to learning-by-doing, but differ in the type of experience required. Learning to produce at lower cost – what we call productivity learning – depends on general experience, while learning to design products that appeal to foreign consumers – market learning – depends on export experience. Using panel and cross-section data on Moroccan manufacturers, we uncover evidence of market learning but little is evidence that productivity learning is what enables firms to export. These findings are consistent with the concentration of Moroccan manufacturing exports in consumer items, i.e., the garment, textile, and leather sectors. It is the young firms that export. Most do so immediately after creation. We also find that, among exporters, new products are exported very rapidly after production has begun. The share of exported output nevertheless increases for 2–3 years after a new product is introduced, which is indicative of some learning. Old firms are unlikely to switch to exports, even in response to changes in macro incentives.