In the motorcycle-taxi market in most Sub-Saharan African countries, the relation between vehicle owner and driver is characterised by a principal-agent problem with the following features: the owner cannot observe the final output of the driver and therefore cannot condition a wage on it, and higher effort from the driver depreciates the motorcycle. These two feature simply that it is in the owner’s best interest that the driver exerts as little effort as possible while still leasing the motorcycle from him. The problem with low effort implementation is that the motorcycle will not generate enough revenue. I analyse the contractual arrangements between owners and the drivers in this market using survey data from four cities in Togo and Benin. Evidence suggests that the quest for trust through kinship between owner and driver may explain the prevalence of a contract that induces drivers to exert excessive effort, leading to adverse outcomes like traffic accidents.
One of the questions the paper addresses implicitly is whether trust necessarily leads to better development outcomes (you’ve seen those cross-country regressions with trust as an independent variable…)
……. in the presence of trust, people tend not to sign formal contracts that define residual rights and the actions to be taken in different expected situations. For example, if the owner and the driver are family members, they will be unlikely to draft a contract that caters to litigation, given that it is socially unacceptable to take a legal action against family.
What this means is that sub-optimal contracting and economic outcomes in developing countries may not be due to a general notion of lack of trust, but rather the lack of a specific kind of trust, let’s call it civic trust. This is the kind of trust that is infused with a healthy dose of skepticism and accompanied by explicit contracting under the shadow of credible enforcement by a third party, the state.
Using a unique dataset on students from the first regional schools in colonial Benin, we investigate the effect of education on living standards, occupation and political participation. Since both school locations and student cohorts were selected with very little information, treatment and control groups are balanced on observables. We can therefore estimate the effect of education by comparing the treated to the untreated living in the same village, as well as those living in villages where no schools were set up. We find a significant positive treatment effect of education for the first generation of students, as well as their descendants: they have higher living standards, are less likely to be farmers, and are more likely to be politically active. We find large village-level externalities – descendants of the uneducated in villages with schools do better than those in control villages. We also find extended family externalities – nephews and nieces directly benefit from their uncle’s education – and we show that this represents a “family-tax,” as educated uncles transfer resources to the extended family.
The amazing finding is that having just one educated person in an extended family makes a significant difference, not only for the educated person’s offspring, but also for their nieces and nephews:
These descendants have better education at all levels than descendants (either children on nieces and nephews) in families where no progenitor was educated. These effects are statistically significant and substantial – such descendants are 20% more likely to have primary school education, 19% more likely to have secondary school education and 11% more likely to go to university..
The main takeaway of the paper is that investment in human capital has a positive effect on long-term development that is independent of (colonial) institutions.
Dr. Leonard Wantchekon of Princeton has set the ball rolling on what is a promising project.
The [African School of Economics] ASE will meet the urgent need for an academic institution capable of generating the necessary human capital in Africa. Although the region has seen significant improvements in primary and secondary education in the past few decades there is still a pressing need for advanced education centers. Through our PhD programs, we hope to provide the missing African voice in many Africa-related academic debates. Furthermore, through our Master in Business Administration (MBA), Master in Public Administration (MPA), Executive MBA and MPA (EMBA and EMPA), Master in Mathematics, Economics and Statistics (MMES), and Master in Development Studies (MDS) programs, we will provide the technical capacity that will enable more Africans to be hired into top management positions in development agencies and multinational corporations operating on the continent. This will foster sustainable hiring practices that will retain talent and experience in Africa.
The school will open its doors in 2014.
Check out an introductory video by Dr. Wantchekon here.
Who was the first leader of independent Africa who lost an election and agreed to step down?
No, it was not Mathieu Kerekou of Benin.
Because my adviser [I doubt he reads this blog] spent some of his early years in academia working and publishing on Somalia, I have been reminded quite a few times that back in 1967 Somalia’s president Aden Abdulle Osman Daar was actually the first leader of independent Africa to lose an election and agree to step down [see here].
This is a fact that many Africanists and journalists have forgotten. Please give credit where it is due.
The Church’s continued ostrich approach to the catastrophe that is HIV/AIDS on the continent:
Pope Benedict XVI on Saturday signed off on an African roadmap for the Roman Catholic Church that calls for good governance and denounces abuses, while labelling AIDS a mainly ethical problem. Benedict signed the apostolic exhortation called “The Pledge for Africa” during a visit to the West African nation of Benin, his second trip to the continent as pontiff.
The document says AIDS requires a medical response, but is mainly an ethical problem.
Changes in behaviour are required to combat the disease, including sexual abstinence and rejection of promiscuity, it adds. “The problem of AIDS in particular clearly calls for a medical and a pharmaceutical response,” it says. “This is not enough however. The problem goes deeper. Above all, it is an ethical problem.”
More on this from the Daily Nation.
Ugandan walk to work protests continue, despite the arrest of key opposition leaders.
Mutiny spreads in Burkina Faso. Compraore has been in power since 1987 after he ousted Thomas Sankara.
Benin’s Yayi Boni might have stole his way into a second term. I hope he is not planning on extending the presidential term limit in Benin.
The Economist has a nice chart showing a cross-section of states and their performance as far as human development goes. Kudos to Benin for doing a good job of improving its human resources. And shame to the tail-enders on the chart on the right hand side.
I just watched this interesting video from the MIT World video archives. Jump to about the 1hr mark to hear his take on African states and their development prospects.
Lastly, Aid Watch has a post on childhood development. For those (Kenyans) out there who think that having the primary school exams determine a kids future is wrong, think again. Everything might be determined at the kindergarten level.
President George Bush will pay his final official visit to the continent this coming week. According to the White House website the president and his wife will visit Africa between Feb 15 and 21 to see firsthand the impact of America’s aid towards prevention and containment of HIV/AIDS and other tropical diseases.
President Bush’s itinerary will include stops in Tanzania, Benin, Ghana, Liberia and Rwanda. Although Bush is wildly unpopular at home and in many other parts of the world, many Africans still view the president in a good light because of the visible impact that his aid policies have had on the continent’s struggle with AIDS. Mr. Bush launched the $500m aids fund for Africa in 2002 in an attempt to help many of the African countries struggling with high infection rates and lack of ARVs. Since then many of the countries that received the aid have managed to reduce the spread of AIDS and deaths due to the virus through the provision of affordable ARVs.
AIDS remains one of Africa’s biggest challenges. The continent has the world’s highest average infection rates and is faced with a crisis as millions of children continue to be orphaned by the scourge. A few countries like Uganda have managed to stem the spread of the virus while others have chosen to treat it as less of a threat. Yet others have even gone comical – South Africa and the Gambia come to mind. In South Africa, Mbeki insists that HIV does not cause AIDs and his health minister thinks that herbs would cure the illness. The President of Gambia on the other hand insists that he can cure the disease, but only on Thursdays.The church in Africa in its reluctance to endorse the use of condoms among the faithful is also playing a role in the spread of the disease.
I hope that Bush’s visit will be a wake up call to African health officials. The continent’s health services are in dire need of modernization since most of them lack equipment and drugs and cannot deal with even the simplest of illnesses.