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Archive for May 2015

A LEAP into the future

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Photo by Mario

The past is never dead. It is not even past. Photo by Mario Gerth

This week is conference week. From Monday to Tuesday, STIAS hosts an ERSA Workshop on the ‘Fiscal history of Africa’. With additional funding by the British Academy, we have been able to invite a stellar list of international visitors: Noel Johnson (George Mason), Christian Makgala (Botswana), Leigh Gardner (LSE), and Jutta Bolt (Groningen). And from Wednesday to Friday, another ERSA workshop, this time on ‘Longitudinal data in African history’, will be held at STIAS. Here, too, we have an exciting list of international presenters: Marcella Alsan (Stanford), Bill Collins (Vanderbilt), Jason Long (Wheaton), Ellen Hillbom and Erik Green (Lund), Neil Cummins (LSE) and several PhD-students. More than 30 local participants will be able to share their research and interact with the visitors. Hosting the workshops back-to-back mean that many can stay for both.

The international and local interest in the two workshops shows that African Economic History is in good health. The rise, or renaissance, of African economic history is evident in the popularity of the annual African economic history meetings, rising from a small group of regulars to, as last year in London showed, a wide circle of scholars from diverse disciplines interested in the African past. Word on the street is that this year’s meeting – from 30-31 October in Wageningen, Netherlands – will be the largest yet.

LEAP_logo_US_2It’s this momentum that has been a catalyst for the creation of a new Economic History research unit in the Department of Economics at Stellenbosch University. And so, this Wednesday we will launch the new identity of this research group: LEAP – the Laboratory for the Economics of Africa’s Past. LEAP (see website) is dedicated to the quantitative study of African economic history, bringing together scholars and students interested in understanding and explaining the long-term economic development of Africa’s diverse societies.

The aim of any research institution is, of course, to produce high-quality research output. This, I believe, can only be achieved through 1) access to funding and 2) recruiting high-quality students (from Africa and elsewhere) to exploit those resources. Both require us to nurture deeper networks across Africa, the US and Europe, and build research partnerships through collaborative projects. I am happy to say that this is already happening, as projects on the fiscal history of South Africa (with Leigh Gardner at the LSE), or the impact of railways in Africa (with Alfonso Herranz at Barcelona), or early South African living standards (with Martine Mariotti at Australian National University, Kris Inwood at Guelph University and Alex Moradi at Sussex) demonstrate.

But more can be done. African archives still hold vast quantities of historical records, of which we’ve only scratched the surface, and too few students are exposed to an expanding Economic History literature. It’s now time to take the leap.

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On the road to riches

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RDP houses

Road to nowhere: RDP houses outside Kokstad, South Africa (Rhodes University)

Escaping poverty is one of the most difficult things to do, especially in a country like South Africa where at least a quarter of the labour force is unemployed. Every year, thousands of young rural men and women move to the urban periphery in search of jobs and a better life for their children. They mostly end up in townships on the fringes of South Africa’s largest cities where the lack of services – housing, water and sanitation, education and health – are unlikely to allow them to escape the poverty they so desperately hope to. Their children, in all likelihood, will remain on the fringes of the formal economy, unable to break free from the poverty trap.

How to solve the immobility of the poor is one of the most vexing questions that captivate economists. What are the policy levers that we can pull to allow a poor household migrating from Qunu to Cape Town to build a better life for their children? One might think of a plethora of policy options: more housing, clinics and sports fields, better sanitation, teachers and public transport, safer streets, classrooms and public parks; in short, all the things we associate with better neighbourhoods. But better neighbourhoods are highly correlated with high incomes, and it is difficult to know which comes first: do rich people create better neighbourhoods, or do better neighbourhoods create rich people?

Two Harvard economists have recently provided the most compelling evidence to date to show that it is neighbourhoods that, in fact, create rich people. They track the participants of a lottery programme in the USA that allowed some families – those that were lucky to win the lottery – to migrate to better neighbourhoods. Because it was a lottery programme, selection is not an issue, meaning they can interpret the difference between those that migrate and those that stay behind as the causal impact of the new neighbourhood. Here they summarize their results:

As an example, consider a set of families who move from Cincinnati to Pittsburgh. Children who grow up in low-income families (at the 25th percentile of the national distribution) in Cincinnati from birth have an income of $23,000 on average at age 26, while those in Pittsburgh have an income of $28,000. Now consider the incomes of children whose families moved from Cincinnati to Pittsburgh at some point in their childhood.

Harvard

 Figure 1 plots the fraction of the difference in income between Pittsburgh and Cincinnati that a child will on average obtain by moving at different ages during childhood. Children who were nine years old at the time of the move (the earliest age we can analyze given available data) capture 50% of this difference, leading to an income of approximately $25,500 as adults. Children who move from Cincinnati to Pittsburgh at later ages have steadily declining incomes, relative to those who moved at younger ages. Those whose families moved after they were 23 experience no gain relative to those who stayed in Cincinnati permanently.

The earlier you  move to a better neighbourhood, the better chance you will have to escape poverty. While this might sound intuitive, this is the first time that economists have credibly established the causal link from residing in a better neighbourhoods to better outcomes later in a child’s life.

But what is it about these better neighbourhoods that really matter? Is it, as Justin Wolfers writes in the New York Times, “their schools, community, neighbors, local amenities, economic opportunities and social norms” that matter the most? The Harvard team has an answer: commuting time. This is how one newspaper reported it:

Commuting time has emerged as the single strongest factor in the odds of escaping poverty. The longer an average commute in a given county, the worse the chances of low-income families there moving up the ladder.

The relationship between transportation and social mobility is stronger than that between mobility and several other factors, like crime, elementary-school test scores or the percentage of two-parent families in a community, said Nathaniel Hendren, a Harvard economist and one of the researchers on the study.

These results should have profound implications for how we think about attempts to alleviate poverty in South Africa. Following the end of apartheid, the government decided to build large, new townships of what became known as RDP-houses in response to the massive housing backlog. These, located on the outskirts of towns and cities, was a legitimate attempt to provide shelter and a basic living standard for South Africans neglected by the previous government. But while they may have improved standards of living immediately, these new neighbourhoods had the crippling effect of locking households into poverty: far from town and city centers with job opportunities, these promises of a new future did little more than to entrench the nefarious spatial policies of apartheid. South Africa today, I venture to say, may be less socially mobile than it was at the dawn of democracy.

What does the South African city of the future look like? More urban sprawl with longer commuting times? Possibly, but then we should accept the fact that it will also be a society with lower levels of social mobility, a society locked into the inequalities of the past. The only way to expunge the past injustices is to bring the poorest closer to the city center. Public transport can help, which it is great to see that Cape Town is now building MyCiti to the poorest neighbourhoods. But it is only a beginning. Why not make Paardeneiland, located close to Cape Town’s city center, a model for new, denser neighbourhoods that cater to low-income households?

If the kid from Qunu will make it in Cape Town, he needs to live in a good neighbourhood with short commuting times for his parents. The walk to economic freedom is still too long.

Written by Johan Fourie

May 20, 2015 at 07:09

Into the wild

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There be Dragons: A chameleon in the Kruger Park

Here be Dragons: A chameleon in the Kruger Park. Photo: Johan Fourie

Two weeks ago, Helanya and I turned off our phones, folded away our laptops, locked up the house, and headed north for a visit to South Africa’s Kruger National Park. We are fortunate to visit frequently and, without exception, these visits remain some of my favourite memories of the last decade. Exactly why that is I don’t quite understand. Perhaps it is the thrill of the chase; hours of driving in search of the elusive leopard (we caught a glimpse of one, but only for a few seconds before it disappeared into the bush), or that moment of awe when a herd of elephant races towards a watering hole evidently upsetting a sleeping hippo, or the Mozambican spitting cobra that silently passes in front of the car, raising its head as a warning to not try anything stupid (and close the windows).

But, in truth, the thrill can quickly wither away, especially when travelling slowly along a bumpy gravel road in the hot, midday sun. When minutes turn into hours since the last ‘spotting’, your thoughts easily drift into the distance, away from the veld, before you suddenly realise you’ve completely neglected your job as animal spotter. You focus again, concentrating on the veld, on the trees and bushes and grass that take the shape of animals but are anything but. It’s not long, though, before you’re lost in your own world again.

For the first few days after your arrival, your thoughts automatically jump back to work. You fail to get away from the daily buzz, to lose track of the immediate newsflashes, the tweets, the facebook posts, the emails, the sounds of urgency that surround our everyday. It’s tough to willingly slow down, zoom out, to take the longer view. To relax without thinking about tomorrow.

But one fine day when the animals are hiding deep in the underbush and when you’ve once again forgotten to look for them, you stumble upon something magical: out of the nothingness, an idea emerges into the open, hoping to entertain. A day-dream. A vision of the future that captivates you, that exhilarates, that awes. It moves into sight, so real you take a mental picture of it to preserve it in memory before it moves on, off to the land of Creativity where all such animal spirits retire. It’s only later, on the plane back to Cape Town, when you recall the flash of brilliance and begin to plot your plans for future fulfilment.

None of those pictures would have been possible in the daily buzz of everyday life. Too many distractions, noise, pollution. The ‘urgent’ must sometimes be set aside, in the hope that the ‘important’ will show itself.

There be Dragons in the Kruger Park. And animals too.

Written by Johan Fourie

May 10, 2015 at 20:34