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- This paper quantifies the threshold effect of external debt on economic growth in Zimbabwe between 1980 and 2016. Results from the Fully Modified Ordinary Least Squares (FMOLS) technique confirm that external debt (up to 57% of GDP) raises economic growth. Beyond the 57% of GDP threshold, external debt lowers growth. A separate analysis of variance shows that the mean GDP per capita is lower by 11% when external debt exceeds 57%. From the sample average, the 57% of GDP threshold suggests that debt stock above 4.7 billion USD can be detrimental to the country’s long-run growth prospects. Currently, Zimbabwe’s external debt is standing at over 11 billion USD which is way above the estimated threshold level. Therefore, the policy implication arising from this paper is that the country’s Finance Minister needs to pursue debt-reduction strategies given that the country’s stock of external debt is already sitting in the growth-reducing territory.
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- The relationship between crime and unemployment has a long history in social science and remains a central point of debate for politicians today. In this paper, the objective is to establish whether youth unemployment has a causal effect on murder cases in KwaZulu-Natal; a province in South Africa facing high levels of both and the contribution is methodological. In particular, this paper pioneers the application of a control function procedure in testing and controlling idiosyncratic endogeneity within a count data framework in a bid to isolate the exogenous effect of youth unemployment on murder crimes. Using local municipality-level panel data observed between 2006 and 2017 and holding constant standard control variables, youth unemployment is found to be exogenous to omitted time-varying correlates suggesting that classical count data models with entity-fixed effects suffice. Also confirmed is that the control function approach reports results that are similar to the classical Poisson estimator while the Negative Binomial alternative tends to underestimate the effect of youth unemployment on crime by about 10%. Consistent with the majority of studies in literature, the analysis finds a positive and sizeable effect of youth unemployment on murder offences. A percentage point increase in youth unemployment increases the odds of murder occurrence by 1.6–1.8 times. This suggests that South Africa’s labour market could be linked to murder crimes in KwaZulu-Natal and that a social policy aimed at creating jobs for young people can be an alternative way of combating murder crimes in the province.
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- Infrastructure is widely considered an important determinant of firm performance but evidence on its importance on technical efficiency of hairdressers is very limited. Against this background, this study sought to compute and compare the technical efficiency levels of female hairdressers operating by the road side with those operating within formalised and designated salons. Primary cross-sectional data were collected using questionnaires and analysed within a quantitative research design. Technical efficiency was measured using a stochastic frontier technique which, in computing efficiency scores, separates the effect of random factors that are exogenous to the hairdressers. Based on a Cobb Douglas functional form chosen by relevant statistical tests, results from the stochastic frontier model estimated by the maximum likelihood confirm that hairdressers operating in designated saloons are more efficient when compared with hairdressers operating by the road side. A policy implication arising from this finding is that the provision of proper infrastructure is necessary to improve technical efficiency of hairdressers currently operating by the road side.
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- Infrastructure is widely considered an important determinant of firm performance but evidence on its importance on technical efficiency of hairdressers is very limited. Against this background, this study sought to compute and compare the technical efficiency levels of female hairdressers operating by the road side with those operating within formalised and designated salons. Primary cross-sectional data were collected using questionnaires and analysed within a quantitative research design. Technical efficiency was measured using a stochastic frontier technique which, in computing efficiency scores, separates the effect of random factors that are exogenous to the hairdressers. Based on a Cobb Douglas functional form chosen by relevant statistical tests, results from the stochastic frontier model estimated by the maximum likelihood confirm that hairdressers operating in designated saloons are more efficient when compared with hairdressers operating by the road side. A policy implication arising from this finding is that the provision of proper infrastructure is necessary to improve technical efficiency of hairdressers currently operating by the road side.
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- The sluggish and sometimes negative growth in sub-Saharan Africa has defined the objectives of most studies seeking to explain the sources of its slow growth. I contribute to this inquiry by estimating how state fragility influences the effect of exchange rate misalignment on economic growth. Since exchange rate misalignment captures the distortionary effects of inappropriate macroeconomic policies in the main, my hypothesis is that resilient and less fragile states cope better with macroeconomic imbalances making misaligned exchange rates less likely to have serious effects on growth in such countries. In testing this hypothesis, I first measure misalignment as deviations of the actual exchange rate from an estimated equilibrium level using the dynamic ordinary least squares method. I then insert this variable and its interaction with state fragility in a growth specification. In line with my hypothesis, results from the system generalised method of moments and data on 13 sub-Saharan countries observed between 2009 and 2018 show a significantly negative effect of exchange rate misalignment on growth that increases with state fragility. Based on this evidence, I urge countries in this region to improve state resilience as an effort to reduce the negative effect of exchange rate misalignment on economic growth.
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- The relationship between trade and industrial performance has received a great deal of empirical attention over the past three decades. Much of this empirical attention has however focused on productivity, employment, and output growth oblivious of profit effects – the primary motive for manufacturers. Different from this literature, this paper contributes to the existing body of knowledge by testing the hypothesis that trade affects profit efficiency of manufacturing industries through its effect on technical and allocative efficiency. Using a panel stochastic frontier model based on 28 South African manufacturing industries observed between 1970 and 2016, evidence confirms a strong positive effect of export intensity on profit efficiency that operates mainly through technical efficiency. Import penetration appears to have improved allocative efficiency without having a discernible effect on profit efficiency. The former result lends empirical support to the long-standing view that outward-oriented policies have the potential to enhance industrial profit maximization while the latter result suggests that inward-oriented polices at worst promote suboptimal input allocation.
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- This paper advances and empirically tests the hypothesis that trade raises input-oriented technical efficiency through cost saving practices that reduce cost inefficiencies. Using a primal and dual True-Fixed-Effects (TFE) stochastic frontier approach on a panel dataset comprising 28 manufacturing industries in South Africa between 1970 and 2016 at 3-digit level, it found average technical and cost efficiency values of 0.83 and 0.33 respectively indicating that the industries operated 33% above their cost minimising level and could have reduced their input usage by 17% without compromising their output level. Empirical findings then confirmed a significant positive effect of import penetration and export intensity on technical efficiency that operates through reduction of cost inefficiencies. These findings do not only support our proposed hypothesis; they also corroborate the idea that competition from global trade forces local industries to rationalise their operations and give up production practices that are not consistent with the cost minimisation objective. The Department of Trade and Industry (DTI) might find these results useful as they suggest that a less restrictive trade policy that promotes exports and imports has the potential to improve resource utilisation within the manufacturing sector through downward cost adjustments.
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- Purpose The purpose is to establish the impact of trade on manufacturing employment in South Africa. Design/methodology/approach Two techniques, the Pooled Mean Group (PMG) and the Dynamic Common Correlated Effects (DCCE), are applied on a panel dataset comprising 26 three-digit manufacturing industries with data observed between 1970 and 2016. Findings The impact of trade on employment is miniscule at best and insignificant at worst once the study controls for cross-sectional dependency. This is true for both skilled and unskilled workers. Employment of skilled workers is explained by remuneration while employment of unskilled workers is explained by output dynamics. Practical implications Trade is widely attacked for causing labour market disruption through job losses. This hypothesis is not supported by data for South Africa as no link is confirmed between trade and employment of skilled and unskilled workers. Originality/value Estimating the trade and employment link for skilled and unskilled workers while controlling for both endogeneity and cross-sectional dependency.
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