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The Cost of Doing Business in Africa: Evidence from Enterprise Survey Data

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  • Eifert, Benn
  • Gelb, Alan
  • Ramachandran, Vijaya
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    Abstract

    Summary Data from the World Bank Enterprise Surveys show that indirect costs (related to infrastructure and services) account for a relatively high share of firms' costs in poor African countries and pose a competitive burden on African firms. We estimate firm-level revenue and value-added functions for six industries in 17 developing countries, demonstrating that firm performance is sensitive to the cost of indirect inputs. As indirect inputs are not usually included in estimations of value added, we argue that existing estimates understate the relative performance of African manufacturing firms.

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    Bibliographic Info

    Article provided by Elsevier in its journal World Development.

    Volume (Year): 36 (2008)
    Issue (Month): 9 (September)
    Pages: 1531-1546

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    Handle: RePEc:eee:wdevel:v:36:y:2008:i:9:p:1531-1546

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    Web page: http://www.elsevier.com/locate/worlddev

    Related research

    Keywords: productivity investment climate manufacturing economic development Africa firm surveys;

    References

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    1. William Easterly, 2002. "The cartel of good intentions: The problem of bureaucracy in foreign aid," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 5(4), pages 223-250.
    2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
    3. Gorodnichenko, Yuriy, 2008. "Using Firm Optimization to Evaluate and Estimate Returns to Scale," IZA Discussion Papers 3368, Institute for the Study of Labor (IZA).
    4. Biggs, T. & Shah, M. & Srivastava, P., 1995. "Technological Capabilities and Learning in African Enterprises," Papers 288, World Bank - Technical Papers.
    5. Dollar, David & Hallward-Driemeier, Mary & Mengistae, Taye, 2005. "Investment Climate and Firm Performance in Developing Economies," Economic Development and Cultural Change, University of Chicago Press, vol. 54(1), pages 1-31, October.
    6. Buys, Piet & Deichmann, Uwe & Wheeler, David, 2006. "Road network upgrading and overland trade expansion in Sub-Saharan Africa," Policy Research Working Paper Series 4097, The World Bank.
    7. Charles I. Jones, 2007. "The Weak Link Theory of Economic Development," Working Papers 042007, Hong Kong Institute for Monetary Research.
    8. Bastos,Fabiano & Nasir, John, 2004. "Productivity and the investment climate : what matters most?," Policy Research Working Paper Series 3335, The World Bank.
    9. Benn Eifert & Alan Gelb & Vijaya Ramachandran, 2005. "Business Environment and Comparative Advantage in Africa: Evidence from the Investment Climate Data," Working Papers 56, Center for Global Development.
    10. World Economic Forum & World Bank & African Development Bank, 2007. "The Africa Competitiveness Report 2007," World Bank Publications, The World Bank, number 6612, October.
    11. Wood, Adrian & Mayer, Jorg, 2001. "Africa's Export Structure in a Comparative Perspective," Cambridge Journal of Economics, Oxford University Press, vol. 25(3), pages 369-94, May.
    12. Francis Teal, 1999. "Why can Mauritius export manufactures and Ghana not?," CSAE Working Paper Series 1999-10, Centre for the Study of African Economies, University of Oxford.
    13. Adrian Wood & Kersti Berge, 1997. "Exporting manufactures: Human resources, natural resources, and trade policy," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 35-59.
    14. Irwin, Douglas A., 2000. "Did Late-Nineteenth-Century U S. Tarriffs Promote Infant Industries? Evidence From the Tinplate Industry," The Journal of Economic History, Cambridge University Press, vol. 60(02), pages 335-360, June.
    15. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
    16. Escribano, Alvaro & Guasch, J. Luis, 2005. "Assessing the impact of the investment climate on productivity using firm-level data : methodology and the cases of Guatemala, Honduras, and Nicaragua," Policy Research Working Paper Series 3621, The World Bank.
    17. Berndt, Ernst R & Wood, David O, 1975. "Technology, Prices, and the Derived Demand for Energy," The Review of Economics and Statistics, MIT Press, vol. 57(3), pages 259-68, August.
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    Cited by:
    1. Sonobe, Tetsushi & Higuchi, Yuki & Otsuka, Keijiro, 2012. "Productivity growth and job creation in the development process of industrial clusters," Policy Research Working Paper Series 6280, The World Bank.
    2. Hoekstra, Ruth, 2013. "Boosting Manufacturing Firms' Exports? The role of trade facilitation in Africa," IEE Working Papers 197, Institut fuer Entwicklungsforschung und Entwicklungspolitik, Ruhr-Universitaet Bochum.
    3. Peters, Jörg & Vance, Colin & Harsdorff, Marek, 2011. "Grid Extension in Rural Benin: Micro-Manufacturers and the Electrification Trap," World Development, Elsevier, vol. 39(5), pages 773-783, May.
    4. Shimada, Go, 2013. "The Economic Implications Of Comprehensive Approach To Learning On Industrial Development (Policy And Managerial Capability Learning):," Working Papers 1001, JICA Research Institute.
    5. Rijkers, Bob & Söderbom, Måns & Loening, Josef L., 2010. "A Rural-Urban Comparison of Manufacturing Enterprise Performance in Ethiopia," World Development, Elsevier, vol. 38(9), pages 1278-1296, September.

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