Results for “south africa”

264 found

Taking a cue from the cellphone industry, an upstart South African
airline is selling flights by the minute and allowing customers to buy
tickets and book flights via text message.

Airtime Airlines takes to
the sky later this month, offering three flights a day from its base in
Durban to Johannesburg, Cape Town and Port Elizabeth. Passengers
purchase minutes much like they would for a prepaid cell phone and
redeem them for a ticket. Fees are assessed according to the length of
the flight – say, 75 minutes for the run from Durban to Johannesburg –
and could save as much as half of what competing airlines charge.

Here is the article.  It’s not yet clear whether they have managed to lease planes, but here is another part of the business plan:

The cost for Airtime minutes can fluctuate, presumably according to
promotions and market factors, so topping off
becomes an exercise comparable to fuel hedging. Buy a big block of
minutes when you think they’re at their cheapest and you look smart,
unless the price drops again the next day. Then again, it might go up.
The price recently rose from 3 Rand to 5 Rand, meaning the cost of a
round-trip flight from Durban to Cape Town climbed from about 750 Rand
($81) to 1,250 Rand (about $134). Still that’s cheaper than the $200 it
would cost on South African Airlines.

But can you sell minutes short?  I thank Christopher Balding for the pointer.

Mr Caballero’s clothes can withstand shots from 9mm pistols to AK-47s
and clients fearing knives can pay extra for stab-proofing.

The market is South Africa and the inspiration is Colombia.  It’s the stab-proofing that impresses me.  Here is the story and I thank NS for the pointer.

File him in the category underappreciated economists.  Does good governance matter for growth?  Could there be a more important question for economists? The standard cross-sectional growth tests do not show much of a robust effect.  But Johannes, along with co-authors Robert Klitgaard and Kamil Akramov, has a 150-page paper showing that if you take all the relevant heterogeneities into account yes, Adam Smith and Doug North were right after all.

Or do you prefer simple regressions which meet the eyeball test?

Here is the full paper.  Here is Johannes’s long paper on South African economic history.

Charge 80% per year on a loan in the U.S. and you’re called a usurer.  Charge 80% on a loan in Latin America or Africa and you can be a poverty-alleviation charity.

That is Dean Karlan and Jonathan Zinman, in today’s WSJ, "In Defense of Usury," p.A18.  Karlan and Zinman discuss their study showing that micro-credit borrowers in South Africa are better off for receiving the money, even when they pay very high interest rates.

The network maps show that economies tend to develop through closely
related products. A country such as Colombia makes products that are
well connected on the network, and so there are plenty of opportunities
for private firms to move in to, provided other parts of the business
climate allow it. But many of South Africa’s current exports–diamonds,
for example–are not very similar to anything.

If the country is to develop new products, it will mean making a big leap. The data show that such leaps are unusual.

Tim Harford explains.  Here are maps of product interrelations.

When my editor and I were exchanging drafts of this piece, my spam blocker wouldn’t let them through.  There is too much talk of Nigeria and diamonds!  Here is one excerpt:

Paul Collier, an economics professor at Oxford University,
has a new and potentially powerful idea.  In his recently published
book, “The Bottom Billion: Why the Poorest Countries Are Failing and
What Can Be Done About It” (Oxford University Press), Professor Collier
favors an international charter – some widely publicized guidelines
that countries can voluntarily adopt – to give transparency in spending
wealth from natural resources.  A country would pledge to have formal
audits of its revenues and their disposition.  Imagine
PricewaterhouseCoopers auditing the copper revenues of Zambia and
issuing a public report.

It’s not as futile as it might sound:

Professor Collier’s proposal at first glance seems toothless; a
truly corrupt country probably wouldn’t follow the provisions of the
charter, which, after all, is voluntary.  Yet citizens could pressure
their government to follow such a charter, and the idea of the charter
would create a focus for political opposition and signify international
support for concrete reform.

Foreign corporations would bring
further pressures to heed the charter.  Multinational companies that are
active in corrupt countries might receive bad domestic publicity.
Eventually the companies might push for adherence to the charter, even
if the charter limited their ability to bribe.  In another context, De
Beers has been stung by bad publicity about “blood diamonds,” and the
company is now a force for positive change where it operates.

In
the optimistic case, a few poor countries start abiding by the charter.
Those countries prosper and attract more investment and status in the
international community.  The pressure to adopt the charter would then
spread.  Of course, promoting the charter costs relatively little and
the potential benefits are significant.  International pressures did
eventually force a change in South African apartheid.  So maybe they can
improve other countries as well.

Did you know that Tony Blair was already promoting such a charter?  And the Nigerian government (really) already commissioned a private sector audit and now has enacted a version of this idea into law?  We’ll see how that goes, but Nigerian flirtation with rule of law ideas is one of the underreported stories of this year.

Paul Collier’s The Bottom Billion is a very exciting and important book.  It is rare to read something on economic development that is true, non-trivial, and potentially useful.  I recommend this book highly, it is also short and easy to read.  Here is a good review of the book by Niall Ferguson.

Here is the whole column.

Mullainathan worked with a bank in South Africa that wanted to make more loans. A neoclassical economist would have offered simple counsel: lower the interest rate, and people will borrow more. Instead, the bank chose to investigate some contextual factors in the process of making its offer. It mailed letters to 70,000 previous borrowers saying, “Congratulations! You’re eligible for a special interest rate on a new loan.” But the interest rate was randomized on the letters: some got a low rate, others a high one. “It was done like a randomized clinical trial of a drug,” Mullainathan explains.

The bank also randomized several aspects of the letter. In one corner there was a photo—varied by gender and race—of a bank employee. Different types of tables, some simple, others complex, showed examples of loans. Some letters offered a chance to win a cell phone in a lottery if the customer came in to inquire about a loan. Some had deadlines. Randomizing these elements allowed Mullainathan to evaluate the effect of psychological factors as opposed to the things that economists care about—i.e., interest rates—and to quantify their effect on response in basis points.

“What we found stunned me,” he says. “We found that any one of these things had an effect equal to one to five percentage points of interest! A woman’s photo instead of a man’s increased demand among men by as much as dropping the interest rate five points! These things are not small. And this is very much an economic problem. We are talking about big loans here; customers would end up with monthly loan payments of around 10 percent of their annual income. You’d think that if you really needed the money enough to pay this interest rate, you’re not going to be affected by a photo. The photo, cell phone lottery, simple or complicated table, and deadline all had effects on loan applications comparable to interest. Interest rate may not even be the third most important factor. As an economist, even when you think psychology is important, you don’t think it’s this important. And changing interest rates is expensive, but these psychological elements cost nothing.”

Mullainathan is helping design programs in developing countries, doing things like getting farmers to adopt better feed for cows to increase their milk production by as much as 50 percent. Back in the United States, behavioral economics might be able to raise compliance rates of diabetes patients, who don’t always take prescribed drugs, he says. Poor families are often deterred from applying to colleges for financial aid because the forms are too complicated. “An economist would say, ‘With $50,000 at stake, the forms can’t be the obstacle,’” he says. “But they can.” (A traditional explanation would say that the payoff clearly outweighs the cost in time and effort, so people won’t be deterred by complex forms.)

Thanks to a reader — his name mistakenly deleted from my email — for the pointer.

"Minimum wage, bah humbug.  It is easy to defend.  Tyrone snorts at you.

First let us clear out some garbage.  The minimum wage should not be $50 an hour, and simply citing this possibility does not serve as an effective reductio.  And yes racist South African labor unions supported minimum wages, but wouldn’t you expect them, vile as they may have been, to support higher wages in any case?

We know the empirical evidence on minimum wages is mixed.  I am familiar with the Card-Krueger smackdowns but at the end of the day you have to work hard to get a big effect on employment.  Most importantly, all of these studies miss the longer-run effects that make a legally binding minimum wage such a good idea.

Don’t obsess over static neoclassical economics, where you start with a firm, a competitive market, and a set of marginal products already in place.  Think dynamic and look at the longer-run.  If you ban jobs beneath some hourly wage, you will end up with more jobs above that wage.  Ex ante, companies can set up their production to mesh with high-wage rather than low-wage jobs.  Surely we should prefer an economy with higher marginal products, higher wages, and higher median income.  Yes this redistributes a bit of wealth from capital but what an efficient way to do so.  And we all know that long-run dynamic gains tend to swamp one-time static losses.

Don’t expect to pick up these effects in any study with a short time horizon.

Furthermore there is more slack in the system than many economic models would indicate.  As a young’un, I worked in a supermarket.  When they raised the legal minimum wage, they raised my wage as well.  I was happy.  No one fired me.

Minimum wages probably lower the net amount of government intervention in an economy.  Lower minimum wages would mean higher welfare payments to make up the difference.  Ever heard of EITC?  In reality, minimum wages and EITC work together to keep the poor at decent standards of living.  More importantly, they keep poor workers in the private sector rather than letting them become wards of the state.  Try living on the minimum wage (much less beneath it), and without the safety net of your parents, if you don’t get my point.

Perhaps you think the minimum wage is an excessively blunt policy instrument, given that many near-minimum jobs are held by upper middle class teenagers.  Fair enough, but this also means that the minimum wage doesn’t put many of those people out of work.  We can go back to focusing on the net effects on the poor.

Tyler, what is really your problem with the minimum wage?  Free market economists love to bash it because they can posture as friends of the poor.  They can pretend that basic economics has great relevance.  They can claim to know something useful, rather than facing the fact that opposition to big government really means opposition to massive income transfers.  Since the American public is not willing to go this route, free market economists have to focus their yapping on the minimum wage and the (actually quite small) benefits of free trade.

Tyler, don’t you agree?  Tyrone signs off."

There he goes again.  As a child, he would never even sit straight at the dinner table.  Readers, if you now wish to refresh yourself, try this, or perhaps even this.  And maybe someone over at CrookedTimber is up for Opposite Day, but on some other topic…?

Brad DeLong asks:

This is one of the most puzzling puzzles in macroeconomics: that foreign-exchange speculators are not very good at linking domestic money and bond markets to the foreign exchange market. Not enough money seems to be engaged in betting that a currency with a high nominal interest rates will not decline in value fast enough to make investing in its securities unprofitable. Why not? It’s an easy thing to do.

James Hamilton [correction: *Menzie Chinn*] adds more.  What are the main hypotheses for why high nominal interest rate currencies appear to outperform the market?

1. The so-called "peso problem."  Someday the roof will cave in on these currencies.  The Asian financial crisis was only a small disruption compared to what will happen someday.  Our current data set is incomplete and does not represent the real population.

2. Holding crummy currencies is riskier than CAPM and variants indicate.  Most likely, the relevant investors are not and cannot be well-diversified.  So their high pecuniary returns are offset by the risk they bear.  If thirty percent of your wealth is in the South African Rand, the relevant measure of your risk may be the variance of that currency, not the covariance of that currency with some broader international market portfolio.  Economic theory usually measures risk by looking at the latter.

3. Many investors stay away from crummy, high nominal interest rate currencies for fear of what their wives (or bosses, consider an agency problem at a financial firm) would say, should they lose money.  The relevant markets are segmented.  This is linked to #2.

4. This used to be a puzzle, but now the profit opportunity has been identified.  The supposed additional risk of the high nominal interest rate currency is phantom.  People now jump into high nominal interest rate currencies, at least when such investments are appropriate to restore an equilibrium of risks and returns.  We should expect the paradox to disappear in future data sets.

Observation: Do not ever write or say "CAPM model."  Do not ever write or say "ATM machine."

Number one is France, Belgium and Sweden are right behind. I am shocked to see China come in fourth, and to see the U.S. (New York State at least) beat out Canada.

The relevant metrics do not measure tax burden fully. Instead the rankings measure a weighted average of various marginal rates; average tax rates do not seem to enter into the calculation. Nor do they seem to consider how much of the tax is actually paid, or what you get for your taxes.

Since 2000, the tax burden, as measured in this fashion, has dropped in 22 countries, risen in 13, and held steady in 15.

The least taxed country is now United Arab Emirates, pushing long-time winner Hong Kong into second place. Next in line for low marginal rates are Singapore, India, South Africa, and Indonesia, an odd mix of countries. Then comes Ireland.

Here are extensive links to the data.

Note that economic theory says that marginal rates should be of primary importance. But often in the data it is the average tax rate that matters. Why is this? Could it be that liquidity effects are paramount? High average rates then suck away cash and end up affecting decisions at the margin. Or consider another channel. The tax system is very complex and full of loopholes and deductions. The average rate might in fact be the best measure of the true marginal rate we have.

Postscript: I know this is a market-oriented economics blog, but hey, I am also a contrarian at heart. I cannot help asking: which countries would you rather live in? Visit?

One view is “France is great, but it would be even better with lower taxes.” Another is: “France is great, and for reasons which bring both its wonders and its high taxes.” I am perpetually torn between these two views, often co-blogger Alex tries to push me more toward the former.