The Economic Value of Time: Evidence from Africa

• DOI: http://doi.org/10.1111/saje.12098
• Date: 01 June 2016
• Published date: 01 June 2016
• Author: Kifle Wondemu

THE ECONOMIC VALUE OF TIME: EVIDENCE

FROM AFRICA

KIFLE WONDEMU

*

Abstract

When excessive and inefficiently implemented, government interventions can result in significant

economic losses for citizens. These include the often-significant cost of lost time. This paper thus

aims to estimate the potential economic welfare benefit of reducing public office waiting times.

Based on data from Johannesburg, Lagos and Addis Ababa, we show that a one-hour reduction in

waiting time improves welfare by 66-74% of the average local wage. High-income earners, college

graduates and private-sector employees enjoy higher gains. Moreover, we note that the proxies

currently used to quantify time-saving benefits diverge significantly from the rate at which

individuals substitute time for money. Our analysis also indicated a substantial delay-induced

citywide efficiency loss. Introducing public–private partnership and charging premium fees for

faster service delivery are justifiable both on grounds of equity and efficiency.

JEL Classification: D63, H400

Keywords: Willingness to pay, waiting time, economic welfare, Addis Ababa, Johannesburg, Lagos

1. INTRODUCTION

Efficient use of scarce resources is a central driver of growth, and it is often secured

through free-market mechanisms. For several reasons, however, markets often fail: if left

to operate without controls, they do not necessarily deliver socially optimal outcomes

(OFT, 2009). As a result, government intervention in the economy is often justified to

correct market failures and achieve social and economic objectives.

In Sub-Saharan Africa, market failures are widespread, and government intervention is

seen as essential for ensuring inclusive growth and development. Unfortunately,

government interventions in these countries are often inefficient and excessive (UNECA,

2010). Although various reform programs have been implemented to address some of the

perceived public-sector weaknesses, dealing with public offices remains cumbersome and

time consuming (UNECA, 2010).

Indeed, when these reform measures were designed, they were primarily aimed at

easing the administrative burden faced by businesses (Macculloch, 2008; Fredriksson,

2010). As a result, citizens have often ended up bearing a large share of the remaining

burden. The paucity of empirical data on red tape-induced time costs to citizens is a

primary reason for the lack of adequate action to reduce this burden.

Excessive bureaucratic procedures reduce citizens’ income, constrain their choices,

induce a suboptimal allocation of time, and ultimately reduce citizens’ welfare. While the

time cost incurred when dealing with public agencies is usually more significant than the

* Corresponding author: Consultant, OSAN, African Development Bank, 01 BP 1387, Abidjan

01, Côte d’Ivoire. E-mail: kiflea@gmail.com/k.wondemu@afdb.org

South African Journal of Economics Vol. ••:•• •• 2015

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