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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Poverty and Growth in the WAEMU (West African Economic and Monetary Union) after the 1994 Devaluation
Author:Azam, Jean-PaulISNI
Year:2004
Periodical:Journal of African Economies
Volume:13
Issue:4
Period:December
Pages:536-562
Language:English
Geographic term:West Africa
Subjects:devaluation
poverty
economic development
Economics and Trade
Development and Technology
External link:https://jae.oxfordjournals.org/content/13/4/536.full.pdf
Abstract:This paper analyses the effects of the 1994 devaluation of the CFA franc on growth and poverty in the WAEMU (West African Economic and Monetary Union) countries, with a medium-run horizon. It shows that poverty increased massively in the wake of the 1994 devaluation, 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 investors in the informal sector. They invest their savings in small firms, where they generally employ people from their social network. Then, capital intensity in the informal sector increases as the formal sector workers 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-capitalizing the informal sector firms, with a negative impact on incomes in the (urban) informal sector. Bibliogr., sum. [Journal abstract]
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