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Determinants and impact of private sector investment in Malawi: evidence from the 2006 investment climate survey

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  • Record, Richard
  • Davies, Simon

Abstract

Over much of the last two decades, the economy of Malawi has been characterized by economic turbulence and uncertainty that has done serious damage to the private sector. Rapid liberalization exposed an unprepared private sector to potentially damaging forces. This paper draws upon the most comprehensive enterprise survey carried out in Malawi in recent years to assess the current state of private sector investment. We find the following key results: (1) low labor productivity is explained primarily by lack inputs per worker, rather than insufficient capital employed; (2) foreign competition in either domestic or export markets encourages reinvestment of current earnings; (3) firms with monopoly power are less likely to invest in increased capacity; and (4) high interest rates encourage Malawian firms to invest incrementally and using retained profits.

Suggested Citation

  • Record, Richard & Davies, Simon, 2007. "Determinants and impact of private sector investment in Malawi: evidence from the 2006 investment climate survey," MPRA Paper 3818, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3818
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    References listed on IDEAS

    as
    1. World Bank, 2006. "World Development Indicators 2006," World Bank Publications - Books, The World Bank Group, number 8151, December.
    2. Richard Record, 2007. "From policy to practice: changing government attitudes towards the private sector in Malawi," Journal of International Development, John Wiley & Sons, Ltd., vol. 19(6), pages 805-816.
    3. World Bank & International Finance Corporation, 2006. "Doing Business in 2006 : Creating Jobs," World Bank Publications - Books, The World Bank Group, number 7421, December.
    4. 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.
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    1. repec:ilo:ilowps:461444 is not listed on IDEAS
    2. Durevall, Dick. & Mussa, Richard., 2010. "Employment diagnostic analysis : Malawi," ILO Working Papers 994614443402676, International Labour Organization.

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    More about this item

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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