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Performance of Manufacturing Firms in Africa : An Empirical Analysis

  • Hinh T. Dinh
  • George R.G. Clarke

This book sheds light on the characteristics of formal and informal manufacturing firms in Africa by comparing these firms with firms in other regions. Drawing on two data sources, the authors find that there is a very low share of manufacturing in GDP in Africa and in African exports. Most African manufacturing firms are informal. These firms are also smaller than firms in other regions and few export. Labor productivity is low in Africa relative to other regions, but this may be because of the more challenging environment - with the lack of physical infrastructure, the heavy burden of business regulation, and other issues. However, after accounting for these differences, the authors find that firms in Sub-Saharan Africa appear more, not less, productive than firms elsewhere. This analysis suggests that improving the business environment might allow firms to enhance their performance. However, given the pervasive distortions in the business environment and the limited resources at the disposal of most African countries, Africa cannot and should not wait until the business environment becomes healthier before growing a more viable manufacturing sector. The book shows that binding constraints vary by country, by sector, and by firm size. Therefore, countries should identify the constraints in the most promising sectors and adopt policies designed specifically to remove these constraints. The evidence in this book overwhelmingly dispels the false notion of Africa's inability to compete globally in manufacturing goods.

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This book is provided by The World Bank in its series World Bank Publications with number 11959 and published in 2012.
ISBN: 978-082-13-9632-2
Handle: RePEc:wbk:wbpubs:11959
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  1. Paolo Angelini & Andrea Generale, 2008. "On the Evolution of Firm Size Distributions," American Economic Review, American Economic Association, vol. 98(1), pages 426-38, March.
  2. R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
  3. Leora Klapper & Luc Laeven & Raghuram Rajan, 2004. "Business Environment and Firm Entry: Evidence from International Data," NBER Working Papers 10380, National Bureau of Economic Research, Inc.
  4. Cabral, Luís M B & Mata, José, 2001. "On the Evolution of the Firm Size Distribution: Facts and Theory," CEPR Discussion Papers 3045, C.E.P.R. Discussion Papers.
  5. Jovanovic, Boyan, 1982. "Selection and the Evolution of Industry," Econometrica, Econometric Society, vol. 50(3), pages 649-70, May.
  6. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  7. Geeta Batra & Daniel Kaufmann & Andrew H. W. Stone, 2003. "Investment Climate Around the World : Voices of the Firms from the World Business Environment Survey," World Bank Publications, The World Bank, number 15143, November.
  8. Mihir Desai & Paul Gompers & Josh Lerner, 2003. "Institutions, Capital Constraints and Entrepreneurial Firm Dynamics: Evidence from Europe," NBER Working Papers 10165, National Bureau of Economic Research, Inc.
  9. Arne Bigsten & Mans Söderbom, 2006. "What Have We Learned from a Decade of Manufacturing Enterprise Surveys in Africa?," World Bank Research Observer, World Bank Group, vol. 21(2), pages 241-265.
  10. Freund, Caroline; Rocha, Nadia, 2010. "What Constrains Africas Exports?," CAGE Online Working Paper Series 16, Competitive Advantage in the Global Economy (CAGE).
  11. Aterido, Reyes & Hallward-Driemeier, Mary & Pagés, Carmen, 2007. "Investment Climate and Employment Growth: The Impact of Access to Finance, Corruption and Regulations Across Firms," IZA Discussion Papers 3138, Institute for the Study of Labor (IZA).
  12. Dunne, T. & Roberts, M.J. & Samuelson, L., 1988. "The Growth And Failure Of U.S. Manufacturing Plants," Papers 1-87-5, Pennsylvania State - Department of Economics.
  13. Aterido, Reyes & Hallward-Driemeier, Mary, 2010. "The impact of the investment climate on employment growth : does Sub-Saharan Africa mirror other low-income regions ?," Policy Research Working Paper Series 5218, The World Bank.
  14. AfDB AfDB, . "Africa Competitiveness Report 2009," Africa Competitiveness Report, African Development Bank, number 11 edited by Adeleke Oluwole Salami, 10.
  15. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
  16. Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
  17. Arturo José Galindo & Alejandro Micco, 2007. "Creditor Protection and Credit Response to Shocks," World Bank Economic Review, World Bank Group, vol. 21(3), pages 413-438, October.
  18. Fisman, Raymond & Svensson, Jakob, 2000. "Are corruption and taxation really harmful to growth? - firm-level evidence," Policy Research Working Paper Series 2485, The World Bank.
  19. Bronwyn H. Hall, 1986. "The Relationship Between Firm Size and Firm Growth in the U.S. Manufacturing Sector," NBER Working Papers 1965, National Bureau of Economic Research, Inc.
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