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Working Paper - 219 - Impact of the business Environment on Output and Productivity in Africa

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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 that 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.

Suggested Citation

  • El-Hadj Bah & Lei Fang, 2015. "Working Paper - 219 - Impact of the business Environment on Output and Productivity in Africa," Working Paper Series 2159, African Development Bank.
  • Handle: RePEc:adb:adbwps:2159
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    Cited by:

    1. Kouamé, Wilfried A.K. & Tapsoba, Sampawende J.-A., 2019. "Structural reforms and firms’ productivity: Evidence from developing countries," World Development, Elsevier, vol. 113(C), pages 157-171.
    2. Tarek M Harchaoui & Murat Üngör, 2018. "The Lion on the Move Towards the World Frontier: Catching Up or Remaining Stuck?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 27(3), pages 251-273.
    3. 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.
    4. Brixiova, Zuzana & Égert, Balázs, 2017. "Entrepreneurship, institutions and skills in low-income countries," Economic Modelling, Elsevier, vol. 67(C), pages 381-391.
    5. repec:eee:wdevel:v:97:y:2017:i:c:p:178-198 is not listed on IDEAS
    6. 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.
    7. repec:spr:manint:v:58:y:2018:i:5:d:10.1007_s11575-018-0354-2 is not listed on IDEAS
    8. repec:bla:afrdev:v:30:y:2018:i:4:p:386-398 is not listed on IDEAS
    9. Marion Dovis & Chahir Zaki, 2018. "Global Value Chains and Business Environment: Which Factors Do Really Matter?," Working Papers 1270, Economic Research Forum, revised 19 Dec 2018.
    10. 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.

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