Essays On The Impact Of Foreign Direct Investments In Africa

Author : Osaretin Olurotimi
Publisher :
ISBN 13 :
Total Pages : 0 pages
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Download or read book Essays on Shocks and Human Capital in African Countries written by Osaretin Olurotimi and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The broad goal of this dissertation is to quantify the effect of shocks, policies, and programs on human capital, firms, and communities, especially in Africa. This is motivated by the need to provide empirical estimates of the impact of humanitarian crises and policy to undergird effective development policy and praxis. In my dissertation, I show how conflict and climate shocks affect children's human capital in Uganda and how foreign direct investment impacts domestic firms in Cote D'Ivoire. My dissertation papers share three themes. First, I provide improved (or initial) micro-level estimates of the impact of some shocks on economic agents in two African countries. Second, all three of my dissertation chapters attempt to answer questions about developing countries in Africa by unearthing and exploring new data sources. Third, the findings from my research have clear implications for contemporaneous education, industrial and climate policy in developing economies that grapple with similar challenges. My research on human capital is motivated by human capital's centrality to livelihoods and national economic growth and the crisis of learning poverty many African countries face. Learning poverty is the inability of children who have completed particular schooling levels to demonstrate cognitive outcomes related to that level. For instance, data from the World Bank showed that up to 83% of children in Uganda of primary completion age were below the minimum proficiency level, while over 95% of children in Chad and Niger were unable to read. This crisis deserves attention to understand the drivers and causes, potentially highlighting solutions. In this dissertation, I look at the role of exogenous factors such as conflict and climate and weather shocks in affecting human capital. For example, in Chapter 1, I examine the effect of historical exposure to an East African insurgency group-The Lord's Resistance Army (LRA)-and contemporaneous exposure to armed conflict on children's learning outcomes. Although there has been a decline in the number of civil wars in Africa since the 1990s, there has been a rise in itinerant and cross-border terrorist groups like Boko-Haram and Al-Shabaab. The LRA has been noted as one of the terrorist groups that have elicited the most humanitarian damage in East Africa. Empirically, I combine data from UWEZO's citizen-led household survey of learning outcomes in Uganda with geo-located conflict data from the Armed Conflict Location & Event Data Project (ACLED). Using a model with fixed effects estimation approach, I find that exposure to the LRA reduced children's learning outcomes in Math and English but did not affect their schooling. The cohort exposed to LRA did not have worse dropout rates or nonenrolment than their peers who were not exposed to LRA conflict. My contributions to the literature on conflict and educational outcomes include the first specific estimates of how exposure to a conflict in childhood impacts learning and schooling differently in an East African context. Also, I provide results on the impact of conflict on out-of-school children, who are overlooked in studies that only consider schooling outcomes. Exposure to LRA is worse for out-of-school children in English. Asides from measuring the medium-term effect of exposure to terrorism. I also measure the impact of contemporaneous conflict, i.e., the conflict that happened in the year children were surveyed and which is more likely to comprise riots and protests than violence against civilians. I use variation in the timing of first exposure to conflict by comparing children exposed in one year to those not yet treated by conflict. The effects of these contemporary conflicts are relatively muted in size and statistical significance compared to the effect of LRA. The results of this work imply a need to measure to impact of the same shock on schooling and learning differently and beyond the short term, as learning could be impacted even after schooling has recovered. Although I provide evidence that schooling quality via teacher absenteeism is affected by conflict in this context, future related work could explore the first-order effects of LRA on parental outcomes to elucidate the mechanisms through exposure to terrorism that affected children's learning in Uganda. Along similar lines, Chapter 3 uses remote sensing data to examine how abnormal rainfall and temperature patterns in early childhood affect human capital outcomes, including children's educational outcomes. I also document how unusually high test date temperatures impact test performance. Analytically, I combine learning outcome data from the UWEZO learning assessments in East Africa with the CHIRTS and CHIRPS temperature and rainfall data from the Climate Hazards Centre at UC Santa Barbara. I find that high test date temperature harms only the learning outcomes of girls and children under 10, while rainfall shocks in-utero have adverse effects. However, positive rainfall shocks at ages 1-4 positively impact learning outcomes. The paper also provides suggestive evidence that possessing some adaption technology like electricity may make children more likely to experience thermal stress when the technology is not in use. Thus, this paper provides an essential accounting of the effects of climate change on African children and highlights the need for additional demographic considerations in testing environments. Another theme that my research examines is the role of Foreign Direct Investment (FDI) in improving the performance of domestically connected local firms. According to the United Nations Conference on Trade and Development (UNCTAD), African countries only received about 4% and 5% of global Foreign Direct Investment in 2020 and 2021, respectively. However, despite its meager share of global FDI, African governments have high hopes for the role that FDI can play in their local economies, evidenced by the growth in the number of investment promotion agencies, incentives, and bilateral and multilateral treaties. Therefore, in Chapter 2, coauthored with Jeremy Foltz and Nohoum Traore, using new, high-quality panel data on firms in Ivory Coast, we revisit an open question on the impact of FDI on productivity and other relevant outcomes among domestic firms in Africa. Africa has not yet experienced the kind of industrial revolution that has supercharged the economies of, for example, South Asian countries. Accordingly, various African countries have initiated policy initiatives such as tax holidays for foreign firms to encourage industrialization. However, our research shows that horizontal FDI reduces domestic firm productivity in Ivory Coast, especially for domestic firms operating in the Service, Commerce, and Manufacturing sectors.In contrast, downstream FDI reduces the likelihood that firms export and the intensity of exports only for firms located in Abidjan, the defacto economic capital. The results of this work are essential for similar African countries as they develop their investment and tax policies. A natural extension of this work is research that accounts more fully for the general equilibrium effects of FDI on the whole economy, including government revenue and community welfare.