Economic Diversification and Growth

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Annexes Annex 5: Key Features of the Uganda Overlapping Generations (OLG) Model Basic features: • Individuals live for (at most) three periods: childhood (period t-1), adulthood (period t) and retirement (period t+1). • The economy produces a homogenous market good that can be either consumed in the period it is produced or stored to yield capital at the beginning of the following period. • Each individual is endowed with one unit of time in childhood and adulthood, and zero units in old age. In adulthood time is allocated inelastically to market work. Modeling features: Individuals • At the beginning of adulthood in t, each individual produces n t children, who depend on their parents for consumption and any spending associated with schooling and health care. • Raising a child also involves a cost of (0,1) of the individual’s net income. Consumption of children is subsumed in the individual’s consumption. • Wages is the only source of income as all individuals work in middle age (second period of life). • Savings can be held only in the form of physical capital. • Agents have no other endowments, except for an initial stock of physical capital at t = 0, which is the endowment of an initial old generation. Each individual is endowed with e t units of human capital. Each unit of human capital earns an effective market wage, w t , per unit of time worked. • Assuming that consumption of children is subsumed in the individual’s consumption, the individual’s utility takes the form (1) Annexes 146 Uganda Country Economic Memorandum: Economic Diversification and Growth in the Era of Oil and Volatility
o where: is total consumption in adulthood (old age), ρ > 0 the discount rate, and p t (0, 1) the probability of survival to old age at the end of adulthood. 1 Thus, children bring utility while they are at home. 2 o Coefficient measures relative preference for today’s consumption and relative preference for surviving children. • The individual’s budget constraints for period t and t+1 are given by 3 (2) Market Production o where: (0, 1) is the tax rate on wages, s saving, r t+1 t+1 the rental rate of private capital, w gross wage income, t and a productivity. t o Combining (2) and (3), the consolidated budget constraint is thus • Firms engaged in market production are identical and their number is normalized to unity. • Each firm i produces a single nonstorable good, using effective labor, where is average labor productivity in the economy, and , where is average human capital, private capital, , and public infrastructure, . 1 Bauer and Chytilová (2007), in a study of Uganda, found a strong negative association between the level of education and individual discount rates; more educated individuals appear to be more patient, even after controlling for other characteristics (age, income group, gender, marital status, and clan linkage). For simplicity, however, the impact of education on individual patience is ignored. 2 Note that we abstract from mortality in childhood. As documented by the World Bank (2009, 2011), Uganda has made significant progress during the past three decades in reducing infant mortality. 3 To abstract from unintended bequests, the saving left by agents who do not survive to old age is assumed to be confiscated by the government, which transfers them in lump-sum fashion to surviving members of the same cohort. The rate of return to saving is thus (1 + r t+2 )/p, as shown in (3). See Agénor (2012, p. 73) for a derivation. (3) (4) 147Annexes
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Report No: 97146-UG Economic Divers
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Contents Contents List of Acronyms.
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Contents Figures Figure 1: Export D
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Contents Tables Table 1: Summary of
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List of Acronyms ACD AFCE AFMUG AFR
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Contents Preface For about ten year
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Contents Acknowledgments The World
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Acknowledgements Credits Regional V
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Exuecutive Executive Summary Figure
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Uganda’s Executive Economy Summar
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Executive Summary longer term as it
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Executive Summary Contractors handl
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Executive Summary was mentioned bef
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Executive Summary 48. Excessive bor
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Executive Summary be met by 2020, w
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Executive Summary Value addition to
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Executive Summary going through the
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Executive Summary Table 1: Summary
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Part I An Economic Development and
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Chapter One 1 Key Messages and Conc
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Chapter One 1 Table 1.1: Poverty Tr
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Chapter 1 is viewed as a promising
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Chapter One 1 also claim 15-17 perc
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Chapter 1 Table 1.6: Savings-Invest
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Chapter 1 significantly by other se
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Chapter 1 Box 1.2: Country Experien
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Chapter 1 Table 1.8: Diversific tio
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Chapter 1 Box 1.3: Product Complexi
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Chapter 1 Box 1.4: A Short-term Exp
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Chapter 1 Figure 1.20: Uganda’s P
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Chapter 2 Development of Oil and Ot
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Box 2.1: Three exploration areas in
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the oil price will recover in the m
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Figure 2.7: Uganda’s Real GDP Gro
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Much of Uganda’s oil deposits are
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2.18. The overall impact of the eme
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IV. The Macroeconomic, and Fiscal I
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Containers loaded with crude oil re
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and other financial institutions to
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poor performance of state-owned ent
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48
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Chapter 3 Key Messages and Conclusi
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Chapter 3 can have a negative impac
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Chapter 3 Box 3.2: Financing of Oil
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Chapter 3 are required to notify su
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Chapter 3 Table 3.1: Mapping of Con
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Chapter 3 Figure 3.2: Horizontal Di
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Chapter 3 Table 3.2: Addressing Hor
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Chapter 4 Strategic Implications of
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Figure 4.1: Average Adjusted Saving
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Box 4.2: Angola Case Study When fou
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time, raising investment spending t
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Figure 4.3: Uganda’s Infrastructu
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Figure 4.7: Cumulative Spending on
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Figure 4.11: Overall Fiscal Deficit
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The efficiency of methods of tax co
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nue will need to be accompanied by
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84
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Chapter 5 Key Messages and Conclusi
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Chapter 5 i. Highly skilled technic
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Chapter 5 Table 5.1: Summary Instit
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Chapter 5 Table 5.2: Governance Ind
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Chapter 5 PFM also creates addition
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Page 137 and 138: Chapter 6 Implementation of the Str
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Page 143 and 144: Steel wire Seamless iron tubes M
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Page 151 and 152: Figure 7.2: Share of Intra-EAC Expo
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Page 155 and 156: Figure 7.8: Transit Traffic t ough
Page 157 and 158: sures aimed at reducing the time an
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Page 161 and 162: Table 7.7: Labor Migration Policies
Page 163 and 164: References: 1. Acemoglu, D., S. Joh
Page 165 and 166: September 2010, 28 (5), 553-571. Wa
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Page 169 and 170: (3) • Consumption basket: composi
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Page 173 and 174: Annex 3: Key Features of the Uganda
Page 175 and 176: Rural Activities: Exportable and Se
Page 177 and 178: Level of Prices • General Level:
Page 179 and 180: Total Expenditures: • Primary: NG
Page 181 and 182: Annex 4: Key Features of the Uganda
Page 183: Recursive dynamics o Following prev
Page 187 and 188: Human Capital Formation • Schooli
Page 189 and 190: • Assuming again full depreciatio
Page 191 and 192: • Thus, an increase in the saving
Page 193 and 194: Annex 6: Econometric Results of Fir
Page 195 and 196: Table A6.3: Probit Estimates of Exp
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Economic Diversification and Growth

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