Working Paper: NBER ID: w18683
Authors: Ann E. Harrison; Justin Yifu Lin; L. Colin Xu
Abstract: Africa's economic performance has been widely viewed with pessimism. In this paper, we use firm-level data for around 80 countries to examine formal firm performance. Without controls, manufacturing African firms perform significantly worse than firms in other regions. They have lower productivity levels and growth rates, export less, and have lower investment rates. Once we control for geography, political competition and the business environment, formal African firms lead in productivity levels and growth. Africa's conditional advantage is higher in low-tech than in high-tech manufacturing, and exists in manufacturing but not in services. The key factors explaining Africa's disadvantage at the firm level are lack of infrastructure, access to finance, and political competition.
Keywords: Africa; firm performance; political competition; infrastructure; access to finance
JEL Codes: O14; O40; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Political Monopoly (D42) | Firm Performance (L25) |
| Access to Informal Finance (G21) | Labor Productivity (O49) |
| Access to Informal Finance (G21) | Growth Rates (O49) |
| Geographical Constraints (R12) | Firm Performance (L25) |
| Corruption (D73) | Firm Performance (L25) |
| Labor Market Regulations (J48) | Firm Performance (L25) |
| Telecommunications Infrastructure (L96) | Firm Performance (L25) |