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Investment in Africa's manufacturing sector: A four country panel data analysis

Author

Listed:
  • Arne Bigsten
  • Paul Collier
  • Stefan Dercon
  • Bernard Gauthier
  • Jan Willem Gunning
  • Anders Isaksson
  • Abena Oduro
  • Remco Oostendorp
  • Catherine Pattillo
  • Måns Söderbom
  • M. Sylvain
  • Francis Teal
  • Albert Zeufack

Abstract

Firm-level data for the manufacturing sector in Africa, presented in this paper, shows very low levels of investment. A positive effect from profits onto investment is identified in a flexible accelerator specification of the investment function controlling for firm fixed effects. There is evidence that this effect is confined to smaller firms. A comparison with other studies shows that, for such firms, the profit effect is much smaller in Africa than in other countries. Reasons for the relative insensitivity of investment to profits in African firms are suggested.

Suggested Citation

  • Arne Bigsten & Paul Collier & Stefan Dercon & Bernard Gauthier & Jan Willem Gunning & Anders Isaksson & Abena Oduro & Remco Oostendorp & Catherine Pattillo & Måns Söderbom & M. Sylvain & Francis Teal , 1997. "Investment in Africa's manufacturing sector: A four country panel data analysis," CSAE Working Paper Series 1997-11, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:1997-11
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    File URL: http://www.csae.ox.ac.uk/materials/papers/9711text.pdf
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    Cited by:

    1. Fioretti, Guido, 2006. "Recognising investment opportunities at the onset of recoveries," Research in Economics, Elsevier, vol. 60(2), pages 69-84, June.
    2. Hallward-Driemeier, Mary, 2001. "Firm-level survey provides data on Asia's corporate crisis and recovery," Policy Research Working Paper Series 2515, The World Bank.
    3. Giorgio Calcagnini & Germana Giombini & Enrico Saltari, 2009. "Firms’ Investment in the Presence of Labor and Financial Market Imperfections," Working Papers 0901, University of Urbino Carlo Bo, Department of Economics, Society & Politics - Scientific Committee - L. Stefanini & G. Travaglini, revised 2009.
    4. Guido Fioretti, 2002. "The Investment Acceleration Principle Revisited by Means of a Neural Net," Computational Economics 0207002, EconWPA.
    5. Léonce Ndikumana, 2001. "Financial Markets and Economic Development in Africa," Working Papers wp17, Political Economy Research Institute, University of Massachusetts at Amherst.
    6. 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.
    7. K. Farla, 2014. "Determinants of firms' investment behaviour: a multilevel approach," Applied Economics, Taylor & Francis Journals, vol. 46(34), pages 4231-4241, December.
    8. Karine Chapelle & Patrick Plane, 2005. "Productive Efficiency In The Ivorian Manufacturing Sector: An Exploratory Study Using A Data Envelopment Analysis Approach," The Developing Economies, Institute of Developing Economies, vol. 43(4), pages 450-471, December.
    9. Måns Söderbom & Francis Teal & Anthony Wambugu, 2002. "Does firm size really affect earnings?," CSAE Working Paper Series 2002-08, Centre for the Study of African Economies, University of Oxford.
    10. Reinikka, Ritva & Svensson, Jakob, 1999. "How inadequate provision of public infrastructure and services affects private investment," Policy Research Working Paper Series 2262, The World Bank.
    11. Louise Grenier & Andrew McKay & Oliver Morrissey, "undated". "Determinants of Exports and Investment of Manufacturing Firms in Tanzania," Discussion Papers 98/5, University of Nottingham, CREDIT.
    12. Shiferaw, Admasu & Bedi, Arjun S., 2009. "The Dynamics of Job Creation and Job Destruction: Is Sub-Saharan Africa Different?," IZA Discussion Papers 4623, Institute for the Study of Labor (IZA).
    13. W.A. Naudéa & R. Oostendorp & P.A.E. Serumaga-Zake, 2002. "South African Manufacturing In An African Context," South African Journal of Economics, Economic Society of South Africa, vol. 70(8), pages 1247-1272, December.
    14. Admasu Shiferaw, 2009. "Which Firms Invest Less Under Uncertainty? Evidence from Ethiopian Manufacturing," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 2, Courant Research Centre PEG, revised 30 Jun 2013.
    15. Reinikka, Ritva & Svensson, Jakob, 1999. "Confronting competition - investment response and constraints in Uganda," Policy Research Working Paper Series 2242, The World Bank.
    16. te Velde, Dirk Willem & Morrissey, Oliver, 2003. "Spatial Inequality for Manufacturing Wages in Five African Countries," WIDER Working Paper Series 066, World Institute for Development Economic Research (UNU-WIDER).
    17. Anupam Das, 2012. "Remittance Behavior of Migrants and its Macroeconomic Effects in Four Developing Countries," International Journal of Applied Behavioral Economics (IJABE), IGI Global, vol. 1(1), pages 41-59, January.
    18. Reinikka, Ritva & Svensson, Jakob, 2002. "Coping with poor public capital," Journal of Development Economics, Elsevier, vol. 69(1), pages 51-69, October.
    19. Schündeln, Matthias, 2005. "Modeling Firm Dynamics to Identify the Cost of Financing Constraints in Ghanaian Manufacturing," Proceedings of the German Development Economics Conference, Kiel 2005 29, Verein für Socialpolitik, Research Committee Development Economics.
    20. Varouj Aivazian & Dipak Mazumdar & Eric Santor, 2003. "Financial Constraints and Investment: Assessing the Impact of a World Bank Loan Program on Small and Medium-Sized Enterprises in Sri Lanka," Staff Working Papers 03-37, Bank of Canada.
    21. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
    22. Akay, Gokhan H. & Yuksel, Mutlu, 2009. "Capital-Skill Complementarity: Evidence from Manufacturing Industries in Ghana," IZA Discussion Papers 4674, Institute for the Study of Labor (IZA).
    23. Twine, Edgar E. & Kiiza, Barnabas & Bashaasha, Bernard, 2015. "The Flexible Accelerator Model of Investment: An Application to Ugandan Tea- Processing Firms," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 10(1), March.

    More about this item

    Keywords

    firm investment; liquidity constraints; African manufacturing;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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