Productivity, Exports Performance and Investment Climate: Evidence from Firm Level-Data

The objective of this paper is to explore the nexus between exports performance and components of the investment climate. The contribution of this paper is twofold. First, it fills the gap in the available literature by examining not only the impact of investment climate on productivity, but also on the decision of the firm to become an exporter. Second, given the scarcity of the available literature on MENA countries, a developing MENA country, namely Egypt, is used in the empirical exercise. We use the World Bank enterprise survey database to assess the impact of physical infrastructure (access to and quality of water and electricity, and communications, availability and pricing of land) and regulatory infrastructure (days to clear goods through customs, licensing and taxation policies, and access to finance) on the likelihood of becoming on exporter. The case of Egypt is of particular interest since between 2004 and 2008, the government of Egypt implemented a series of reforms in order to improve the investment climate. Moreover, reviewing and improving business-related regulations is currently on top of the reform agenda. Our findings suggest that customs administration, the availability of land and land pricing, access to finance and competition from the informal firms are the most important impediments that hinder the increase in the number of exporters.