Interesting academic articles for June 2020

Here’s what I’ve been looking forward to reading this month!

Ola Olsson, Maria Eriksson Baaz, and Peter Martinsson. 2020. “Fiscal capacity in ‘post’-conflict states: Evidence from trade on Congo river.Journal of Development Economics.

In many post-conflict states with a weak fiscal capacity, illicit domestic levies on trade remain a serious obstacle to economic development. In this paper, we explore the interplay between traders and authorities on Congo River – a key transport corridor in one of the world’s poorest and most conflict-ridden countries; DR Congo. We outline a general theoretical framework featuring transport operators who need to pass multiple taxing stations and negotiate over taxes with several authorities on their way to a central market place. We then examine empirically the organization, extent, and factors explaining the level of taxes charged by various authorities across stations, by collecting primary data from boat operators. Most of the de facto taxes charged on Congo River have no explicit support in laws or government regulations and have been characterized as a “fend for yourself”-system of funding. Our study shows that traders have to pass more than 10 stations downstream where about 20 different authorities charge taxes. In line with hold-up theory, we find that the average level of taxation tends to increase downstream closer to Kinshasa, but authorities that were explicitly prohibited from taxing in a recent decree instead extract more payments upstream. Our results illustrate a highly dysfunctional taxing regime that nonetheless is strikingly similar to anecdotal evidence of the situation on the Rhine before 1800. In the long run, a removal of domestic river taxation on Congo River should have the potential to raise trade substantially.

Diana Mitlin. 2020. “The politics of shelter: Understanding outcomes in three African cities.” ESID working paper no. 145.

This paper analyses the politics of shelter provision in three African cities, focusing on the needs of and provision for the low- and middle-income residents. Housing is a priority for low- and middle-income households. Governments influence multiple facets of land and shelter and affect the shelter options realisable for urban residents. The significance of housing to citizen wellbeing means that housing policy and programming is attractive to politicians seeking popular support. The framework of political settlements is used to structure the analysis. In all three cities, national political elites seek to influence housing outcomes. In the two capital cities, elites use clientelism (backed up by violence) to advantage themselves and secure rents for influential local groups (or factions). Territorial controls are used by elites to influence electoral outcomes, while approaches to housing help to gain legitimacy through strengthening paradigmatic ideas that encapsulate a vision for development. To date, the framework has primarily been applied to the national level. Hence, this application is both novel and a test of the framework’s relevance at this spatial scale and with this sectoral focus.

Nansozi K. Muwanga , Paul I. Mukwaya and Tom Goodfellow. 2020. “Carrot, stick and statute: Elite strategies and contested dominance in Kampala.” ESID working paper no. 146.

Although Yoweri Museveni’s National Resistance Movement (NRM) has dominated Uganda’s political scene for over three decades, the capital Kampala refuses to submit to the NRM’s grip. As opposition activism in the city has become increasingly explosive, the ruling elite has developed a widening range of strategies to try and win urban support and constrain opposition. In this paper, we subject the NRM’s strategies over the decade 2010-2020 to close scrutiny. We explore elite strategies pursued both from the ‘top down’, through legal and administrative manoeuvres and a ramping up of violent coercion, and from the ‘bottom up’, through attempts to build support among urban youth and infiltrate organisations in the urban informal transport sector. Although this evolving suite of strategies and tactics has met with some success in specific places and times, opposition has constantly resurfaced. Overall, efforts to entrench political dominance of the capital have repeatedly failed; yet challenges to the regime’s dominance have also been unable to weaken it in any sustained way. We examine why each strategy for dominance has produced limited gains, arguing that together these strategies reproduced a situation of intensely contested control, in which no single group or elite can completely dominate the city.

Jose Cuesta, Stephen Devereux, Abdul‐Gafaru Abdulai, Jaideep Gupte, Luigi Peter Ragno, Keetie Roelen, Rachel Sabates–Wheeler, and Tayllor Spadafora. 2020. “Urban social assistance. Evidence, challenges, and the way forward, with application to Ghana.Development Policy Review.

Urbanisation is accelerating, and urban poverty is increasing worldwide, yet few countries have developed comprehensive urban social assistance programmes, and those that do exist are often extensions or duplicates of rural programmes. Urban social protection needs, however, to reflect the distinct characteristics and vulnerabilities of the urban poor, especially working in informal activities and their higher living costs. This article addresses two questions: what is the current evidence on effective social assistance programmes in urban contexts around the world? And, how can such programmes be designed and implemented in practice? We pay special attention to social assistance as it is specifically designed to benefit the poor. The article surveys the challenges of designing social assistance programmes for urban contexts, focusing on specific urban vulnerabilities, targeting the urban poor, and setting appropriate payment levels. It reviews existing evidence of such programmes, including seven brief country case studies. These issues are examined in detail for Ghana, a rapidly urbanising country. Livelihood Empowerment Against Poverty (LEAP), the predominantly rural flagship assistance program in Ghana, can be adjusted to the urban context in several respects. Advertising, (social) media, direct text messaging, and local NGOs should prove more effective at promoting registration than using community figures. An urban-specific proxy means test should be developed to improve targeting. The cash benefit should be increased and adjusted regularly, and possibly accompanied by subsidised utilities and services.

Sandra García and Jorge Cuartas. 2020. “Can poverty alleviation programs crowd-in private support? Short- and Middle-Run Effects of a Conditional Cash Transfer Program on Inter-Household Transfers.Journal of Social Policy.

Conditional cash transfer (CCT) programs have become an important component of social assistance in developing countries. CCTs, as well as other cash subsidies, have been criticized for allegedly crowding out private transfers. Whether social programs crowd out private transfers is an important question with worrisome implications, as private support represents an important fraction of households’ income and works as a risk sharing mechanism in developing countries. Furthermore, empirical evidence on the effect of public transfers on private transfers is mixed. This paper contributes to the literature by using a unique dataset from the quasi-experimental evaluation of a CCT in Colombia and an empirical strategy that allows us to correct for pre-existing differences between treated and control groups. Our results suggest that the public transfer did not crowd out private transfers, neither in the short-run nor in the middle-run. Instead, it increased the probability of receiving support in cash, in kind, and in non-paid labor from different private sources by approximately 10 percentage points. Moreover, we find that the monetary value of private transfers increased by 32 – 38% for treated households.

Alan Zarychta. 2020. “Making social services work better for the poor: Evidence from a natural experiment with health sector decentralization in Honduras.World Development.

Governments in many less developed countries have decentralized their social support systems over the last several decades. However, despite enthusiasm for these reforms, evidence remains limited and mixed as to whether they improve the delivery of basic social services. I take advantage of an unexpected pause in reform implementation in Honduras due to the country’s 2009 coup to investigate the effects of decentralization on local health services. Drawing on administrative data, an original survey of health workers, and qualitative interviews, my analysis shows that decentralization is credibly associated with increases in preventive care for women and that improved accountability and greater resilience to shocks are important mechanisms for this change. Moreover, my analysis highlights how regional organizations use decentralization to assert their own influence and deflect negative political consequences while pressuring for improvements in service delivery. These findings shed light both on the possibilities for improving local social services through governance reform and how national-level reforms can be leveraged by powerful actors at lower rungs of the governmental hierarchy.

Richard Clark and Lindsay R. Dolan. 2020. “Pleasing the Principal: U.S. Influence in World Bank Policymaking.American Journal of Political Science.

How do policies in international organizations reflect the preferences of powerful institutional stakeholders? Using an underutilized data set on the conditions associated with World Bank loans, we find that borrower countries that vote with the United States at the United Nations are required to enact fewer domestic policy reforms, and on fewer and softer issue areas. Though U.S. preferences permeate World Bank decision making, we do not find evidence that borrower countries trade favors in exchange for active U.S. intervention on their behalf. Instead, we propose that U.S. influence operates indirectly when World Bank staff—consciously or unconsciously—design programs that are compatible with U.S. preferences. Our study provides novel evidence of World Bank conditionality and shows that politicized policies can result even from autonomous bureaucracies.

Freetown is innovating with property taxes

Low tax revenues are one of the perennial development challenges in many African countries. This is in many ways a data problem, as governments often lack adequate data on citizens’ incomes, places of employment, and addresses to tax them.

Freetown, Sierra Leone is taking an innovative approach to this problem. They’ve introduced a new property tax system which uses satellite data and easily observable visual characteristics of houses, such as the number of windows they have, to estimate the taxable value of property. This has allowed them to expand the number of properties in their database, and appears to be making taxation more equitable as well. Taxes on the top 20% of properties by value have tripled, while taxes on the bottom 20% have dropped by half.

How did this come about?

The new system has been in the works since Yvonne Aki-Sawyerr was elected mayor in 2018 and made improved revenue collection a central component of her Transform Freetown agenda. Like many cities, Sierra Leone’s capital has long been hampered by limited tax revenues. Aki-Sawyerr recognised that in order to expand services, the Freetown City Council (FCC) would need to dramatically increase property tax collection. She convened a working group, which decided to implement a simplified “points based” system [based on observable characteristics of the buildings]…

While it may seem straightforward on the surface, the reformed “points-based” system introduced in Freetown provides crucial advantages over alternative approaches. It is far easier to administer than systems that rely on individual experts to value each property. It is more sustainable than more complex modelling approaches, which require detailed data that is often not available and are dependent on external support. And it is more equitable than systems based on buildings’ surface area, which tend to dramatically under-tax more valuable properties.

Moreover, Freetown’s system is likely to be more acceptable to taxpayers – and more resistant to corruption – because every aspect of the valuation is transparent, readily available, and verifiable. A key objective is to ensure every property is subject to a standardised process that is easily understood and roughly mirrors market values. The goal is to ensure universality and fairness to help build trust with taxpayers.

Africa Update for May 2020

The latest edition of Africa Update is out! We’ve got mental health in Ghana, home brewing in South Africa, vintage Somali May Day celebrations, Nigerian digital art, and more.

Photos from last year’s Lamu dhow race, by Roland Klemp

West Africa: In Ghana, activists are encouraging men to speak out about their mental health issues.  Ghana is also using drones to efficiently transport coronavirus test swabs for analysis.  Lockdowns are hitting countries like Senegal hard, where 85% of people in a recent survey said their incomes had dropped.  

Central Africa: Uganda has banned the import of used clothing over concerns about coronavirus.  Uganda has also prohibited the use of public transport during the pandemic, even though this is cutting many people off from medical care and increasing rates of domestic violence.  This is a strangely beautiful drone video of Kampala’s empty streets during lockdown.  Here’s how a financier of the Rwandan genocide was captured in France 26 years later.

Some interesting data on revenue performance across the continent, via Amaka Anku

East Africa: Somalia has launched its first ever government-run cash transfer program for over 1 million vulnerable citizens.  Somalia also has few reported coronavirus deaths, but informal reports from gravediggers suggest the real toll is higher.  Kenya has created a new state corporation meant to profit from the labor of people in prisons.  Tanzania appears to be covering up its real number of coronavirus deaths, even as the president has refused to take basic safety precautions.

Southern Africa: Malawi is one of the few countries without a coronavirus lockdown, after the high court blocked it over concerns of its economic impact on poor citizens.  South Africa banned alcohol sales during the lockdown, leading supermarkets to just coincidentally leave all the ingredients for home brewing next to each other.  South African Airways will be divided up amongst its competitors after going into bankruptcy.

Art interlude: check out this amazing vintage Somali May Day Poster, via Faduma Hassan

Coronavirus: Many African countries have limited scientific lab capacity, and had to use it for testing instead of genomic sequencing, which means that any eventual vaccine might not be as effective for viral strains on the continent.  There’s some interesting data here about the varied nature of lockdowns across Africa, including the fact that most countries imposed them unusually early, with fewer than 10 domestic cases.  Reporting on coronavirus in Africa should do more to highlight the many mutual aid groups supporting their communities.

Other health news: A new malaria vaccine being piloted in Ghana, Kenya and Malawi could make the virus less severe.  Only 18 African countries have adequate systems for recording births and deaths.  Putting chlorine dispensers next to communal water sites is an easy way to improve sanitation in Uganda. 

Agriculture: Here’s a good summary of how the pandemic is affecting food systems across Africa.  People used to respond to locust invasions in East Africa by eating them, but new research says that this strategy doesn’t work any longer as the bugs are exposed to too many pesticides. How can regional rice market integration help avoid shortages in West Africa?  Exports of medical marijuana and hemp are growing across Africa, even as many countries still ban recreational smoking.

Countries vary widely in the percentage of their citizens without access to national IDs, via Carlos Lopes

Economics + technology: Global remittance flows are expected to drop by more than US$100 billion as immigrants abroad are affected by the pandemic.  African tax collectors don’t have very many good options for making up lost revenue due to the pandemic. On the bright side, the virus is driving innovations in technology across Africa.

Gender: Check out the great resources at the African Feminism website and the African Feminist Archive.  Meet the female athletes breaking barriers in Somaliland.  Nigeria has some of the world’s strictest abortion laws, and over 60,000 women die annually from illegal abortions or complications during childbirth.  Rwanda has pardoned 50 women accused of having illegal abortions, but hasn’t changed its restrictive abortion laws.

I’m loving Adekunle Adeleke‘s creative digital portraits

Immigration: In China, African immigrants are facing discrimination over fears that they’re spreading the virus.  Israel has nullified a law which discouraged people from applying for asylum by forcing them to deposit 20% of their monthly salaries in savings accounts.  Meet the scholar studying the global fashion history of the African diaspora.  And Astrid Haas and I have written about whether safe rural migration programs could support urban safety nets in African countries during the pandemic.

Are African countries doing enough to provide economic relief during the pandemic?

800px-Mobile_money_transfer
A pre-covid cash transfer withdrawal in Kenya, via Wikipedia

I’ve got an article out at the New Humanitarian looking at how African countries have responded to the economic impacts of coronavirus.  Most countries were quick to take public health measures to contain the virus, but responding to its economic harms has taken more time.  The first wave of economic measures mostly benefitted the middle class:

Economic relief efforts have come in two waves so far. The first, implemented in late March and early April, often involved cuts in the fees and taxes citizens must pay to the government or to banks.

For example, Kenya has cut income tax rates for both the lowest and the highest earning categories, and has cut corporate tax rates from 30 percent to 25 percent. Ghana is providing free water to citizens as long as they don’t have any overdue bills with the national water company. And 18 African countries have lowered interest rates to encourage individuals and businesses to borrow from banks.

These relief efforts are fairly easy for governments to implement, since they only involve changing payment policies. They also primarily benefit the middle class, who are more likely to have formal jobs that pay income taxes, fully paid water bills, and loans from a bank.

Pro-poor relief efforts are now getting off the ground, albeit more slowly:

The second wave of economic relief efforts is now getting underway as of mid-April. This has involved direct support to poor people who might otherwise go hungry.

Rwanda and Uganda have already begun providing people in their capital cities with food aid. Kenya and Malawi have started cash transfers, and South Africa has increased its monthly payments to current welfare beneficiaries, and is creating new cash transfer programmes for the newly unemployed…

Notably, the countries that moved relatively quickly on economic relief all had welfare programmes in place already. But these existing schemes are primarily aimed at alleviating rural poverty, while the impact of coronavirus is being felt most heavily in cities. This means many countries are being forced to create new relief programmes rather than scaling up existing ones.

 

Snapshots of coronavirus response in Kenya and Senegal

Two interesting new sets of polling data have recently come out about pandemic response in Kenya (from the Population Council) and Senegal (from the Center for Global Development).  Here are some key points.

Kenya

  • Public health
    • 83% of people knew that fever was a symptom of the disease, but only 52% knew that coughing also was
    • 85% of people said they’re staying home more than they usually do, but 79% had left the house at least once in the last day (likely for work or shopping)
    • 76% of people say they’re washing their hands 7 times per day or more
  • Economics
    • 36% of people have lost all their income and 45% of people have lost some of their income in the last two weeks (81% of total sample)
    • 68% of people say they’ve had to reduce their food intake
    • Only 7% of people have received any assistance
    • Most of the assistance provided came from NGOs or the business community, and was largely soap (72%) and food (40%)
    • The people receiving assistance often did not report that they had been skipping meals, suggesting that the most vulnerable people aren’t being helped

Senegal

  • Public health
    • Almost everyone had heard of coronavirus, and 90% of people said they had stopped attending services at their mosque due to the lockdown
    • 72% of people supported a continued lockdown, although support is lower among people who’ve lost some of their income
  • Economics
    • 85% of people report having lost some or all of their income
    • Over 33% are skipping meals
    • 45% of people say that food prices have increased
    • The population of Dakar has decreased by 5% as people flee to rural areas

Unpacking formalization of firms in low income countries

baskets
A roadside basket vendor in Nairobi, 2018

The International Centre for Tax and Development has an interesting new article out which assesses the idea of promoting formalization of small firms in low income countries.  As they note,

  1. First, there is no simple distinction between formal firms and informal firms: there are many degrees of ‘formalisation’, with many firms registered in some areas, but not others, and paying some taxes and fees, but not others.
  2. Second, formalisation policies, including registering new taxpayers, are often drawn up without adequate appreciation of the practical challenges of taxing informal businesses and actually raising new revenue from registered taxpayers.
  3. Third, the term ‘informal sector’ lumps together a hugely diverse set of businesses, ranging from large tax-evading firms to small and micro businesses. Relatively large, but informal and cash-based firms present a major problem of tax evasion. By contrast, expanded taxation of smaller firms offers limited revenue potential, while requiring distinctive strategies more attuned to questions about equity, inclusion, and administrative realities.
  4. Finally, simply widening the tax net is insufficient to strengthen tax–accountability linkages or taxpayer engagement. More nuanced strategies are likely needed.