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Impact of the business environment on output and productivity in Africa

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  • Bah, El-hadj M.
  • Fang, Lei

Abstract

Africa is the poorest part of the world and it has the worst environment for long term business success by most standards. Empirical works normally find a negative correlation between income per worker and measures for poor business environment. This paper develops a general equilibrium model to assess the quantitative effects of the business environment, including access to finance, regulation, crime, corruption and infrastructure, on output and TFP for 30 Sub-Saharan African countries. We find that the quantitative effects of these areas of the business environment are large. They together can explain about 67% of the variation in income per capita relative to the US. Improving these dimensions of the business environment will be key for the long term development of the continent.

Suggested Citation

  • Bah, El-hadj M. & Fang, Lei, 2011. "Impact of the business environment on output and productivity in Africa," MPRA Paper 32225, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:32225
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    More about this item

    Keywords

    Business environment; Investment Climate; African Development; Productivity;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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