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Investment in Africa's manufacturing sector: A four country panel data analysis

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Author Info

  • Arne Bigsten
  • Paul Collier
  • Stefan Dercon
  • Bernard Gauthier
  • Jan Willem Gunning
  • Anders Isaksson
  • Abena Oduro
  • Remco Oostendorp
  • Cathy Pattillo
  • Måns Söderbom
  • M. Sylvain
  • Francis Teal
  • Albert Zeufack

Abstract

Firm-level data for the manufacturing sector in Africa, presented in this paper, shows very low levels of investment. A positive effect from profits onto investment is identified in a flexible accelerator specification of the investment function controlling for firm fixed effects. There is evidence that this effect is confined to smaller firms. A comparison with other studies shows that, for such firms, the profit effect is much smaller in Africa than in other countries. Reasons for the relative insensitivity of investment to profits in African firms are suggested.

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Bibliographic Info

Paper provided by Centre for the Study of African Economies, University of Oxford in its series CSAE Working Paper Series with number 1997-11.

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Date of creation: 1997
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Handle: RePEc:csa:wpaper:1997-11

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Keywords: firm investment; liquidity constraints; African manufacturing;

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References

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  1. Nabi, Ijaz, 1989. "Investment in Segmented Capital Markets," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 453-62, August.
  2. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February.
  3. Bond, Stephen & Meghir, Costas, 1994. "Dynamic Investment Models and the Firm's Financial Policy," Review of Economic Studies, Wiley Blackwell, vol. 61(2), pages 197-222, April.
  4. Jenkins, Carolyn, 1998. "Determinants of Private Investment in Zimbabwe," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 7(1), pages 34-61, March.
  5. King, Robert G. & Levine, Ross, 1993. "Finance, entrepreneurship and growth: Theory and evidence," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 513-542, December.
  6. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  7. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  8. Athey, Michael J. & Laumas, Prem S., 1994. "Internal funds and corporate investment in India," Journal of Development Economics, Elsevier, vol. 45(2), pages 287-303, December.
  9. Stephen Bond & Julie Elston & Jacques Mairesse & Benoit Mulkay, 1997. "Financial Factors and Investment in Belgium, France, Germany and the UK:A Comparison Using Company Panel Data," NBER Working Papers 5900, National Bureau of Economic Research, Inc.
  10. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
  11. Tybout, James R, 1983. "Credit Rationing and Investment Behavior in a Developing Country," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 598-607, November.
  12. Martin Mühleisen & Dhaneshwar Ghura & Roger Nord & Michael T. Hadjimichael & E. Murat Ucer, 1995. "Sub-Saharan Africa," IMF Occasional Papers 118, International Monetary Fund.
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Citations

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Cited by:
  1. Anupam Das, 2012. "Remittance Behavior of Migrants and its Macroeconomic Effects in Four Developing Countries," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 1(1), pages 41-59, January.
  2. Måns Söderbom & Francis Teal & Anthony Wambugu, 2002. "Does firm size really affect earnings?," CSAE Working Paper Series 2002-08, Centre for the Study of African Economies, University of Oxford.
  3. Fioretti, Guido, 2006. "Recognising investment opportunities at the onset of recoveries," Research in Economics, Elsevier, vol. 60(2), pages 69-84, June.
  4. Bigsten, Arne & Soderbom, Mans, 2005. "What have we learned from a decade of manufacturing enterprise surveys in Africa ?," Policy Research Working Paper Series 3798, The World Bank.
  5. Admasu Shiferaw, 2009. "Which Firms Invest Less Under Uncertainty? Evidence from Ethiopian Manufacturing," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 2, Courant Research Centre PEG, revised 30 Jun 2013.
  6. te Velde, Dirk Willem & Morrissey, Oliver, 2003. "Spatial Inequality for Manufacturing Wages in Five African Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Hallward-Driemeier, Mary, 2001. "Firm-level survey provides data on Asia's corporate crisis and recovery," Policy Research Working Paper Series 2515, The World Bank.
  8. Guido Fioretti, 2002. "The Investment Acceleration Principle Revisited by Means of a Neural Net," Computational Economics 0207002, EconWPA.
  9. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
  10. Léonce Ndikumana, 2001. "Financial Markets and Economic Development in Africa," Working Papers wp17, Political Economy Research Institute, University of Massachusetts at Amherst.
  11. Varouj Aivazian & Dipak Mazumdar & Eric Santor, 2003. "Financial Constraints and Investment: Assessing the Impact of a World Bank Loan Program on Small and Medium-Sized Enterprises in Sri Lanka," Working Papers 03-37, Bank of Canada.
  12. Shiferaw, Admasu & Bedi, Arjun S., 2010. "The Dynamics of Job Creation and Job Destruction: Is Sub-Saharan Africa Different?," Proceedings of the German Development Economics Conference, Hannover 2010 59, Verein für Socialpolitik, Research Committee Development Economics.
  13. Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
  14. Farla, Kristine, 2013. "Determinants of firms' investment behaviour: A multilevel approach," MERIT Working Papers 055, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  15. Reinikka, Ritva & Svensson, Jakob, 1999. "Confronting competition - investment response and constraints in Uganda," Policy Research Working Paper Series 2242, The World Bank.
  16. Giorgio Calcagnini & Germana Giombini & Enrico Saltari, 2009. "Firms’ Investment in the Presence of Labor and Financial Market Imperfections," Working Papers 0901, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2009.
  17. Schündeln, Matthias, 2005. "Modeling Firm Dynamics to Identify the Cost of Financing Constraints in Ghanaian Manufacturing," Proceedings of the German Development Economics Conference, Kiel 2005 29, Verein für Socialpolitik, Research Committee Development Economics.
  18. Louise Grenier & Andrew McKay & Oliver Morrissey, . "Determinants of Exports and Investment of Manufacturing Firms in Tanzania," Discussion Papers 98/5, University of Nottingham, CREDIT.
  19. Reinikka, Ritva & Svensson, Jakob, 1999. "How inadequate provision of public infrastructure and services affects private investment," Policy Research Working Paper Series 2262, The World Bank.

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