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Does Investment Climate Matter for Firm's Technical Efficiency? An Application to Middle Eastern and North African Manufacturing

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  • Tidiane Kinda
  • Patrick Plane
  • Marie‐Ange Véganzonès‐Varoudakis

Abstract

Drawing on World Bank enterprise surveys, this paper shows that investment climate (IC) is correlated with firms' technical efficiency (TE) in eight manufacturing industries of 22 developing countries. Essential aspects of IC include the quality of infrastructure, the experience and education of the labour force, the cost of and access to financing, and different dimensions of government–business relations. The empirical analysis also illustrates that IC deficiencies in many Middle‐East and North‐Africa countries are associated with low TE. The exception is Morocco and, to some extent, Saudi‐Arabia, where the IC and TE rank close to that of the sample's most efficient economies. The paper also highlights that industries more exposed to international competition, as well as small and medium domestic firms, exhibit a higher sensitivity to IC limitations. Copyright © 2014 John Wiley & Sons, Ltd.

Suggested Citation

  • Tidiane Kinda & Patrick Plane & Marie‐Ange Véganzonès‐Varoudakis, 2015. "Does Investment Climate Matter for Firm's Technical Efficiency? An Application to Middle Eastern and North African Manufacturing," Journal of International Development, John Wiley & Sons, Ltd., vol. 27(7), pages 1267-1293, October.
    • Handle: RePEc:wly:jintdv:v:27:y:2015:i:7:p:1267-1293
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    Cited by:

    1. M.A. Véganzonès-Varoudakis & H. T. M. Nguyen, 2018. "Investment climate, outward orientation and manufacturing firm productivity: new empirical evidence," Applied Economics, Taylor & Francis Journals, vol. 50(53), pages 5766-5794, November.
    2. Asif M. Islam & Silvia Muzi, 2022. "Does mobile money enable women-owned businesses to invest? Firm-level evidence from Sub-Saharan Africa," Small Business Economics, Springer, vol. 59(3), pages 1245-1271, October.
    3. Hyland,Marie Caitriona,Islam,Asif Mohammed, 2021. "Gendered Laws, Informal Origins, and Subsequent Performance," Policy Research Working Paper Series 9766, The World Bank.
    4. Amr Hosny, 2018. "Firm Performance and their Perception of Political Instability in Egypt: Evidence from an Endogenous Treatment Regression Model," Journal of African Development, African Finance and Economic Association (AFEA), vol. 20(2), pages 61-68.
    5. Hosny Amr, 2017. "Political Stability, Firm Characteristics and Performance: Evidence from 6,083 Private Firms in the Middle East," Review of Middle East Economics and Finance, De Gruyter, vol. 13(1), pages 1-21, April.
    6. Hoang Thanh Mai NGUYEN & Marie-Ange VEGANZONES-VAROUDAKIS, 2017. "Investment climate, outward orientation and manufacturing firm productivity: New empirical evidence," Working Papers 201717, CERDI.

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