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Impact of the business environment on output and productivity in Africa

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  • Bah, El-hadj
  • Fang, Lei

Abstract

We develop a general equilibrium model to assess the quantitative effects of the business environment, including regulations, crime, corruption, infrastructure and access to finance, on output and total factor productivity (TFP) in Sub-Saharan Africa. The first four dimensions are modeled as a tax on output and the finance dimension is modeled as a borrowing constraint. The model is simulated for a sample of Sub-Saharan African countries using the country-specific financial development and the country-specific joint distribution between productivity and taxes. We find that the simulated output and TFP are highly correlated with those in the data and the model accounts for 48% of the variation of output in the data. Access to finance alone accounts for 39% and the other four dimensions account for 11% of the dispersion in output.

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  • Bah, El-hadj & Fang, Lei, 2015. "Impact of the business environment on output and productivity in Africa," Journal of Development Economics, Elsevier, vol. 114(C), pages 159-171.
  • Handle: RePEc:eee:deveco:v:114:y:2015:i:c:p:159-171
    DOI: 10.1016/j.jdeveco.2015.01.001
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    Cited by:

    1. Brixiova, Zuzana & Égert, Balázs, 2017. "Entrepreneurship, institutions and skills in low-income countries," Economic Modelling, Elsevier, vol. 67(C), pages 381-391.
    2. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-1891, September.
    3. Wilfried Kouamé & J.-A Tapsoba, 2018. "Structural Reforms and Firms’ Productivity: Evidence from Developing Countries," Post-Print hal-01723100, HAL.
    4. Era Dabla-Norris & Giang Ho & Annette J Kyobe, 2016. "Structural Reforms and Productivity Growth in Emerging Market and Developing Economies," IMF Working Papers 16/15, International Monetary Fund.
    5. David E. Bloom & Michael Kuhn & Klaus Prettner, 2016. "Africa’s Prospects for Enjoying a Demographic Dividend," VID Working Papers 1604, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
    6. Diagne, Youssoupha S, 2013. "Impact of business environment on investment and output of manufacturing firms in Senegal," MPRA Paper 54227, University Library of Munich, Germany.
    7. Pless, Jacquelyn & Fell, Harrison, 2017. "Bribes, bureaucracies, and blackouts: Towards understanding how corruption at the firm level impacts electricity reliability," Resource and Energy Economics, Elsevier, vol. 47(C), pages 36-55.
    8. Valentina Diana RUSU & Angela ROMAN, 2016. "The Business Environment In Cee Countries: Current Challenges And Perspectives," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 8(1), pages 128-147, March.
    9. repec:eee:wdevel:v:97:y:2017:i:c:p:178-198 is not listed on IDEAS

    More about this item

    Keywords

    Business environment; Financial development; Productivity misallocation; African development;

    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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