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Poverty and Growth in the WAEMU after the 1994 Devaluation

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  • Azam, Jean-Paul

Abstract

This paper brings out that poverty increased massively in the wake of the 1994 devaluation of the CFA franc, despite a significant recovery of economic growth. Although this increase affected all the social groups, it fell mostly on the urban poor. An analytical model is presented, which explains this puzzle by the stratification of the labour market, assuming that the formal sector workers are at the same time the investors in the informal sector. Then, capital intensity in the latter increases as the former anticipate the cut in formal sector wages that the long-awaited devaluation brings about. Ex post, they run down their assets for consumption-smoothing purposes, thus de-capitalising the informal sector firms, with a negative impact on incomes in the (urban) informal sector. Copyright 2004, Oxford University Press.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 197.

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Date of creation: 2003
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Publication status: Published in Journal of African Economies, vol.�13, n°4, décembre 2004, p.�536-562.
Handle: RePEc:ide:wpaper:615

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  1. Casella, Alessandra & Eichengreen, Barry, 1994. "Can Foreign Aid Accelerate Stabilization?," CEPR Discussion Papers 961, C.E.P.R. Discussion Papers.
  2. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  3. Devarajan, Shantayanan & Rodrik, Dani, 1991. "Do the benefits of fixed exchange rates outweigh their costs? The Franc Zone in Africa," Policy Research Working Paper Series 777, The World Bank.
  4. Rama, Martin, 1998. "Wage misalignment in CFA countries: are labor market policies to blame?," Policy Research Working Paper Series 1873, The World Bank.
  5. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  6. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  7. Demery, Lionel & Squire, Lyn, 1996. "Macroeconomic Adjustment and Poverty in Africa: An Emerging Picture," World Bank Research Observer, World Bank Group, vol. 11(1), pages 39-59, February.
  8. Angus Deaton, 2000. "Counting the world’s poor: problems and possible solutions," Working Papers 212, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  9. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  10. Azam, Jean-Paul, 1997. "Public Debt and the Exchange Rate in the CFA France Zone," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 54-84, March.
  11. Jean Paul Azam & Bruno Biais & Magueye Dia & Christine Maurel, 2001. "Informal and Formal Credit Markets and Credit Rationing in C�te D'Ivoire," Oxford Review of Economic Policy, Oxford University Press, vol. 17(4), pages 520-534.
  12. Aryeetey, Ernest & Udry, Christopher, 1997. "The Characteristics of Informal Financial Markets in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 161-203, March.
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Cited by:
  1. Honohan, P. & Beck, T.H.L., 2007. "Making finance work for Africa," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3125420, Tilburg University.
  2. Grimm, Michael & Gunther, Isabel, 2005. "Inter- and Intra-household Linkages Between the Informal and Formal Sector: A Case Study for Urban Burkina Faso," Working Paper Series RP2005/14, World Institute for Development Economic Research (UNU-WIDER).
  3. Montfort Mlachila & Tidiane Kinda, 2011. "The Quest for Higher Growth in the WAEMU Region," IMF Working Papers 11/174, International Monetary Fund.
  4. Mason, Nicole M. & Jayne, T.S. & Chapoto, Antony & Donovan, Cynthia, 2011. "Putting the 2007/2008 global food crisis in longer-term perspective: Trends in staple food affordability in urban Zambia and Kenya," Food Policy, Elsevier, vol. 36(3), pages 350-367, June.

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