Browsing by Author "Durevall, Dick"

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A Dynamic Model of Inflation for Kenya 1974 - 1996
(1998) S. Ndungu, Njuguna; Durevall, Dick; Department of Economics
This paper develops an error correction model with the aim of analysing the behaviour of prices in Kenya during 1974 -1996. In estimating the model, we first test for cointegration in the money and foreign exchange markets, using the Johansen procedure. The cointegrating vectors are then included in an autoregressive distributed-lag model, and a general-to-specific procedure is applied to obtain a parsimonious, empirically constant, error correction model. We find that in the long run inflation emanates from movements in the exchange rate, foreign prices, and terms of trade. The error correction term for the monetary sector does not enter the model, but money supply and the interest rate influence inflation in the short run. Inflation inertia is found to be an important determinant of inflation up until 1993, when about 40% of the current inflation is carried over to the next quarter. After 1993, inertia drops to about 10%. The dynamics of inflation are also influenced by food supply constraints, proxied by maize-price inflation. These findings indicate that the exchange rate is likely to be a more efficient nominal anchor than money supply, and that inflation could be made more stable by policies that secure the supply of maize during droughts.
Adult Mortality, AIDS and Fertility in Rural Malawi
(2013-08) Durevall, Dick; Lindskog, Annika; Dept of Economics, University of Gothenburg
The impact of HIV/AIDS on fertility in sub-Saharan Africa has received attention recently, since changes in population structure can impact on future economic development. We analyze the effect of AIDS on actual and desired fertility in rural Malawi, using data from Malawi 2004 Demographic and Health Survey and population censuses. Since AIDS was the dominating cause of death during the 1990s and early 2000s, we use prime-age adult mortality as the key explanatory variable. The focus is on heterogeneity in the response of gender-specific mortality rates. By estimating ordered probit models we show that actual fertility responds positively to male mortality but negatively to female mortality, and that the overall fertility response is positive but small. One interpretation of the findings is that the effects of female and male mortality differ because of an old-age security motive for having children. When a woman risks death before her children grow up, she is less likely to need support of children and demand should be low, but when the risk of husband’s death is high, the woman should expect to rely more on children’s support.
Aid and child health: Local effects of aid on stunting in Malawi
(University of Gothenburg, 2022-11) Durevall, Dick; Isaksson, Ann-Sofie; Department of Economics, University of Gothenburg
Abstract: Motivated by a recent setback in the fight against child malnutrition, this study explores whether aid projects help to reduce stunting, or impaired growth, among children in the local area. Focusing on Malawi, a country with very high stunting prevalence and for which we have access to geo-referenced data on aid projects from a broad range of donors, we geographically match spatial data on 778 aid project sites of 22 different donors with anthropometric and background data on 26,604 children under the age of 5. To identify the effect of aid, we rely on spatial and temporal variation in aid project coverage and survey rollout, coupled with variation in childbirth years in relation to project start. The empirical results consistently indicate a positive impact of early life aid exposure on child growth. The positive treatment effect materializes already for children born in the early project implementation phase and lasts for children born up to 3 years after project start and is seemingly driven primarily by multilateral aid and projects focusing on rural development, vulnerability, infrastructure, and education.
Aid and institutions: Local effects of World Bank aid on perceived institutional quality in Africa
(University of Gothenburg, 2021-06) Isaksson, Ann-Sofie; Durevall, Dick
Motivated by the lack of sub-national empirical evidence on the relationship between aid and institutional development, this study explores the local effects of World Bank aid on perceived institutional quality in African aid receiving countries. We combine geo-referenced data on the subnational allocation of World Bank aid projects to Africa over the 1995-2014 period with geo-coded survey data for 73,640 respondents across 12 Sub-Saharan African countries. To account for the endogenous placement of World Bank project sites, we compare the estimated effect of living near a site where a World Bank project was under implementation or completed at the time of the interview, to that of living near a site where we know that a World Bank project appeared after the survey date. The empirical results suggest a positive impact of World Bank aid on perceived institutional quality, as measured by citizens’ expressed willingness to abide by key formal institutions. This applies even if we consider overall World Bank aid, i.e. not just projects specifically targeted at institutional development. As may be expected, however, the estimated effects are more pronounced when restricting our attention to projects focusing on institution building. Notably, the observed effects concern finalized projects, not projects still under implementation, highlighting that institutional change is a slow process.
Are Fairtrade Prices Fair? An Analysis of the Distribution of Returns in the Swedish Coffee Market
(2015-02) Durevall, Dick; Dept. of Economics, University of Gothenburg
Consumers pay a premium for Fair Trade coffee, often assuming that it mainly benefits poor coffee farmers. However, several studies report that most of the premium accrues to actors in the consumer countries, such as roasters and retailers. This paper analyses how the returns to Fair Trade are distributed among bean producer countries, roasters and retailers, and Fairtrade Sweden, using scanner data on 185 products from Sweden and information about costs of production. The distribution depends on how much more costly it is to produce Fair Trade coffee compared to conventional coffee, given costs of beans and licences. Assuming the difference is 5 SEK per kg (about USD 0.80), which is on the high side, roasters and retailers get 61%, while producer countries, i.e., coffee farmers, cooperatives, middlemen, exporters and Fairtrade International, get 31%. The rest accrues to Fairtrade Sweden. These estimates are uncertain, but there is there strong evidence that Fair Trade retail prices are higher than the level attributable to the costs of Fair Trade beans and licences.
Competition in the Swedish Coffee Market
(2004) Durevall, Dick; Department of Economics
It is a widespread belief that multinationals are exploiting their market power in national coffee markets by keeping consumer prices too high and thereby limiting demand for coffee beans. The purpose of this study is to test if this is case in the Swedish market for roasted coffee. In the Swedish market there are a few very large roasting companies and many small ones; a market structure that is typical of many consumer markets for coffee. To analyze the degree of market power, an oligopoly model is estimated using market time series data. The econometric approach is to first test for long-run relationships between the variables with cointegration analysis, and then to estimate a system of equations for demand and pricing behavior. Our major finding is that there is no evidence of market power in the long run, and only some in the short run.
Competition in the Swedish coffee market, 1978–2002
(Elsevier, 2007) Durevall, Dick
Are multinationals exploiting their market power in national coffee markets by keeping consumer prices too high and thereby limiting demand for imports of coffee beans? The purpose of this study is to address this issue by testing if there is market power in the Swedish market for roasted coffee. The market structure is typical of many consumer markets for coffee, with four very large roasting companies, two of which are multinationals, plus many small ones. To analyze the degree of market power, an oligopoly model is estimated using market time series data. The econometric approach is to first test for long-run relationships between the variables with cointegration analysis and then to estimate a system of equations for demand and pricing behavior. Our key finding is that there is evidence of some market power in the short run but none in the long run.
Cost Pass-Through in the Swedish Coffee Market
(2017-03) Durevall, Dick; Dept. of Economics, University of Gothenburg
Cost pass-through to retail prices shows how changes in marginal costs are allocated between producers and consumers, and it is therefore closely related to market structure and competition. This paper uses Swedish data on coffee products at the barcode level to evaluate pass-through from the cost of green coffee beans, the main marginal cost, to the retail price of roasted and ground coffee. First long-run cost pass-through is estimated for each product, and then regression is used to analyse how pass-through varies across market shares, retailer-owned brands and other product characteristics. A general result is that pass-through is roughly complete for products with large market shares, while those with small market shares have low pass-through rates. There is no evidence that retailer-owned brands have higher pass-through than brand-name products with similar market shares, which would be the case if retailer-owned brands avoided double marginalization through vertical integration. Thus, although there is not perfect competition in the Swedish coffee market, a large part of it appears to be highly competitive.
Demand for coffee in Sweden: The role of prices, preferences and market power
(Elsevier, 2007) Durevall, Dick
There is a widespread belief that consumer coffee prices are high relative to bean prices and that lower consumer prices would lead to substantial increases in bean exports from Third-World countries. This issue is evaluated by analysing how retail prices, preferences and market power influence coffee demand in Sweden. A demand function is estimated for the period 1968-2002 and used, together with information on import prices of coffee beans, to simulate an oligopoly model. This approach gives estimates of the maximum average degree of market power and shows how coffee demand would react to reductions in marginal cost to its minimum level. The maximum level of market power is found to be low, but it generates large spreads between consumer and bean prices because the price elasticity has low absolute values. Moreover, the impact of a price decrease would be small because long-run coffee demand is dominated by changes in the population structure in combination with different preferences across age groups. Hence, a change to perfect competition would only have a negligible effect on bean imports.
Demand for Coffee: The Role of Prices, Preferences and Market Power
(2005) Durevall, Dick; Department of Economics
The purpose of this paper is to evaluate the role of prices in determining demand for roasted coffee in Sweden. This is of interest because many believe that consumer prices are high relative to green coffee-bean prices, and that lower consumer prices would increase demand for coffee beans. Coffee demand is estimated on data for the period 1968-2002. In the long run, changing preferences appear to determine demand for roasted coffee, and a reduction in consumer prices would only have a temporary impact on consumption. Hence a permanent decrease in consumer prices would only increase exports of coffee beans to Sweden for a couple of years.
Does Market Liberalization Increase Total Factor Productivity: Evidence from the Manufacturing Sector in Zimbabwe
(1998) Durevall, Dick; Bjurek, Hans; Department of Economics
In this paper we analyze if the structural adjustment program (ESAP), implemented during 1991-1995, contributed to an increase in total factor productivity in the manufacturing sector. To evaluate if productivity has grown we first estimate indexes of total factor productivity for 31 manufacturing sub-sectors for the period 1980-1995. Then we use panel data methods to test for the effects of trade reform and other variables related to ESAP. In general the growth rates vary greatly both over time and across sections. The overall impression is that there was no growth in total factor productivity on average during the whole period of ESAP. However, during the last two years, 1994-1995, most sub-sectors experienced increases in total factor productivity.
A Dynamic Model of Inflation in Kenya
(Oxford University Press, 2001) Durevall, Dick; Ndung’u, Njuguna; Ndung’u, N. Department of Economics University of Nairobi and KIPPRA
This paper analyses the dynamics of inflation in Kenya during 1974 –1996, a period characterised by external shocks and internal disequilibria. By developing a parsimonious and empirically constant model we find that the exchange rate, foreign prices, and terms of trade have long-run effects on inflation, while money supply and interest rate only have short run effects. Inertia is found to be important up until 1993, when about 40% of the current inflation was carried over to the next quarter. After 1993, inertia drops to about 10%. Moreover, inflation is also influenced by changes in maize-grain prices, indicating a non-negligible role for agricultural supply constraints in the inflation process.
East African Community: Pre-conditions for an Effective Monetary Union
(2011-12) Durevall, Dick; Dept of Economics, University of Gothenburg
Kenya, Tanzania and Uganda signed the Treaty for the establishment of the East African Community (EAC) in 1999, which entered into force in July 2000. In 2007 it was signed by Burundi and Rwanda. According to the Treaty, EAC should first form a customs union, then a common market and a monetary union, and finally a political union. The Customs Union was formally completed in 2010, and Common Market Protocol was signed in 2009. Currently the intention is to sign the East African Monetary Union protocol 2012, while the date for actual implementation of the common currency is uncertain. The purpose of this note is to discuss preconditions for an effective monetary union among the EAC members, with a focus on Rwanda. It first outlines potential economic benefits and costs of a monetary union, and then discusses political and institutional preconditions. It concludes that although there are potentially substantive economic net-benefits, a monetary union is a risky project for political reasons. The political will among policymakers is key to successful implementation, and it could vanish with a change of government or because of discontent among influential lobby groups. However, the process towards forming are monetary union is appears to be highly beneficial the EAC members, both directly by improving monetary policy and indirectly by contributing to economic integration.
Economic Inequality and HIV in Malawi
(2009-12-28T13:35:23Z) Durevall, Dick; Lindskog, Annika
Education and HIV incidence among young women: causation or selection?
(2015-11) Durevall, Dick; Lindskog, Annika; George, Gavin; Dept. of Economics, University of Gothenburg
Several studies report that schooling protects against HIV infection in Sub-Saharan Africa. This study examines the effect of secondary school attendance on the probability of HIV incidence among young women aged 15-24, using panel data from rural KwaZulu-Natal in South Africa. Three approaches are used to distinguish causation from selection: instrumentation to identify the causal effect, a fixed effects model to control for constant unobserved factors and assessments of the bias from selection on unobserved variables. Although there is a strong negative association between secondary school attendance and HIV incidence, we are not able to find support for a causal effect. Thus, there is no evidence that interventions that increase secondary school attendance in KwaZulu-Natal would mechanically reduce HIV risk for young women. Our focus on school attendance, in contrast to studies that analyze school attainment, might explain the negative finding.
The Futile Quest for a Grand Explanation of Long-Run Government Expenditure
(2010-01-22T12:34:47Z) Durevall, Dick; Henrekson, Magnus
This paper carries out a critical reappraisal of the two contending theories purporting to explain long-run government spending: Wagner’s Law and different variants of the ratchet effect. We analyze data spanning from the early 19th century until the present day in Sweden and the United Kingdom. Hence, in contrast to previous studies, we evaluate the validity of Wagner’s Law and the ratchet effect hypothesis over a very long time period, starting at the beginning of industrialization. Cointegration analysis is used to investigate the long-run relationships between government expenditure and GDP, focusing on sub-periods and structural breaks. Moreover, we test the ratchet effect hypothesis by estimating models which allow for asymmetric adjustment. According to our main results, Wagner’s Law does not hold in the long run, although the data are consistent with Wagner’s Law between roughly 1860 and the mid 1970s. This can be traced to the formation of the modern public sector, including the introduction of public education, health care, and so forth. Yet Wagner’s Law did not hold during the initial industrialization phase (before 1860), and in recent periods GDP only affects the government spending share when we control for population age structure. Finally, we find some evidence of asymmetric adjustment in the UK, particularly in the post-WWII period. However, the ratchet effect is not a general cause of the growth of government spending.
Gender Policy and Intimate Partner Violence in Colombia
(University of Gothenburg, 2021-07) Durevall, Dick; Department of Economics, University of Gothenburg
In 1995, Colombia signed the first legally binding international treaty that criminalizes all forms of violence against women. After this, the government took a number of steps to improve laws and policies, but progress was slow. This paper employs a differences-in differences approach and Demographic and Health Surveys from 2010 and 2015 to estimate the impact of a renewed effort to reduce intimate partner violence (IPV), based on recommendations by the UN. To identify the effect of the national policies, it uses the fact that while the central government passes laws and formulates policies, it partly relies on departments (provinces) to implement them. Of Colombia’s 33 departments, about a quarter had a gender policy in place by 2010. The main finding is that self-reported physical violence decreased from 20% to 16% between 2010 and 2015 in departments that had implemented IPV policies, while it stayed at 18% in the others.
HIV/AIDS, Adult Mortality and Fertility: Evidence from Malawi
(2008-02-05T09:09:53Z) Durevall, Dick; Lindskog, Annika
The purpose of this paper is to analyse the impact of HIV/AIDS on fertility in Malawi. The future course of fertility will have an impact on both macroeconomic variables, such as GDP per capita, and various socioeconomic factors like mother-to-child-transmission of HIV, child mortality, the number of orphans, and public expenditures on schooling. Data on both prime-age adult mortality and HIV prevalence rates at districts level are used to measure the impact of HIV/AIDS, exploiting the large geographical variation in the distribution of HIV/AIDS in Malawi. Fertility is estimated for individual women, and measured as the number of births given during the last five years. Estimations are also carried out for the desired number of children. The major finding is that HIV/AIDS reduces fertility. Uninfected women both give birth to and desire to have fewer children in districts where prime-age adult mortality and HIV-prevalence are high, and vice versa. However, for young women, aged 15-19, there is a positive relationship between fertility and prime-age adult mortality and HIV prevalence, possibly because they wish to have children while being uninfected. This is likely to have negative effects on both educational attainment and child mortality. As also shown by previous studies, HIV-infected women give birth to fewer children than uninfected women. This is probably due to changed fertility preferences, as well as to physiological factors.
How Does Communal HIV/AIDS Affect Fertility? - Evidence from Malawi
(2009-06-25T06:58:25Z) Durevall, Dick; Lindskog, Annika
Recently there has been a surge in interest on how HIV/AIDS affects fertility in countries hit by the disease. In this study, the effect of communal HIV/AIDS on fertility in rural Malawi is estimated using individual data from the 2004 Malawi Demographic and Health Survey on fertility and the ideal number of children. The survey includes individual HIV status, making it possible to distinguish between behavioural and physiological effects. The main indicator of communal HIV/AIDS is the district-level prime-age mortality rate, obtained from the 1998 Population Census. The paper first tests the overall behavioural fertility response due to the epidemic, and then tests for differences in response due to gender-specific communal mortality and HIV rates, as well as individual age and knowledge about mother-to-child HIV transmission. The main findings are: communal HIV/AIDS has a negative but small impact on fertility; actual fertility and women’s ideal number of children is more negatively affected by HIV/AIDS among women than among men; and a woman’s age and knowledge about mother-tochild transmission of HIV are important determinants of her fertility response to the disease.
Importing High Food Prices by Exporting: Rice Prices in Lao PDR
(2014-11) Durevall, Dick; van der Weide, Roy; Dept. of Economics, University of Gothenburg
This paper shows how a developing country, Lao PDR, imports high glutinous rice prices by exporting its staple food to neighboring countries, Vietnam and Thailand. Lao PDR has extensive export controls on rice, generating a sizable difference between domestic and international prices. Controls are relaxed after good harvests, leading to a surge in exports early in the season and rapidly rising prices later in the year. There is thus a strong case for removal of trade restrictions since they give rise to price spikes, keep the long-term price of glutinous rice low, and thereby hinder increases in income from agriculture. Although this is a case study of Lao PDR, the findings may equally apply to other developing countries that export their staple food.