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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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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2004/rp2004-19.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Papers with number UNU-WIDER Research Paper RP2004/19.

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Length: 22 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:unu:wpaper:rp2004-19

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Keywords: C.te d'Ivoire; Niger; poverty; exchange rate;

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References

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  1. 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.
  2. Deaton, A., 2000. "Counting the World's Poor: Problems and Possible Solutions," Papers 197, Princeton, Woodrow Wilson School - Development Studies.
  3. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  4. 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.
  5. Casella, Alessandra & Eichengreen, Barry, 1996. "Can Foreign Aid Accelerate Stabilisation?," Economic Journal, Royal Economic Society, vol. 106(436), pages 605-19, May.
  6. Rama, Martin, 1998. "Wage misalignment in CFA countries: are labor market policies to blame?," Policy Research Working Paper Series 1873, The World Bank.
  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. 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.
  9. 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.
  10. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  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.
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Citations

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Cited by:
  1. Montfort Mlachila & Tidiane Kinda, 2011. "The Quest for Higher Growth in the WAEMU Region: The Role of Accelerations and Decelerations," IMF Working Papers 11/174, International Monetary Fund.
  2. Patrick Honohan & Thorsten Beck, 2007. "Making Finance Work for Africa," World Bank Publications, The World Bank, number 6626.
  3. 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.
  4. Grimm, Michael & Gunther, Isabel, 2005. "Inter- and Intra-household Linkages Between the Informal and Formal Sector: A Case Study for Urban Burkina Faso," Working Papers RP2005/14, World Institute for Development Economic Research (UNU-WIDER).

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