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Firm-Level Productivity and Technical Efficiency in MENA Manufacturing Industry: The Role of the Investment Climate

  • Tidiane Kinda

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Patrick Plane

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

  • Marie-Ange Veganzones

    (CERDI - Centre d'études et de recherches sur le developpement international - CNRS : UMR6587 - Université d'Auvergne - Clermont-Ferrand I)

This paper investigates the relationship between firm-level productivity and investment climate (IC) for a large number of countries (23) and manufacturing industries (8). We first propose three measures of firms' productive performances: Labor Productivity (LP), Total Factor Productivity (TFP), and Technical Efficiency (TE). We reveal that enterprises in MENA perform in average poorly, compared to other countries of the sample. The exception is Morocco, whose various measures of firm-level productivity rank close to the ones of the most productive countries. We show at the same time that firms' competitiveness in MENA is handicapped by high Unit Labor Cost, compared to main competitors like China and India. The empirical analysis also reveals that the investment climate matters for firms productive performances. This is true (depending on the industry) for the quality of a large set of infrastructures, the experience and level of education of the labor force, the cost and access to financing, as well as to a lower extent, different dimensions of the government-business relation. These findings bear important policy implication by showing which dimension of the investment climate could help manufacturing firms in MENA to be more competitive on the world market.

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Date of creation: 17 Jan 2011
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Handle: RePEc:hal:wpaper:halshs-00556700
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  1. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  2. Escribano, Alvaro & Guasch, J. Luis, 2005. "Assessing the impact of the investment climate on productivity using firm-level data : methodology and the cases of Guatemala, Honduras, and Nicaragua," Policy Research Working Paper Series 3621, The World Bank.
  3. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," Harvard Institute of Economic Research Working Papers 1719, Harvard - Institute of Economic Research.
  4. Kathy S. He & Randall Morck & Bernard Yeung, 2003. "Corporate Stability and Economic Growth," William Davidson Institute Working Papers Series 553, William Davidson Institute at the University of Michigan.
  5. John McMillan, 1998. "Managing Economic Change: Lessons from New Zealand," The World Economy, Wiley Blackwell, vol. 21(6), pages 827-843, 08.
  6. McMillan, John, 2004. "A Flexible Economy? Entrepreneurship and Productivity in New Zealand," CEPR Discussion Papers 4614, C.E.P.R. Discussion Papers.
  7. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers 3643, C.E.P.R. Discussion Papers.
  8. Dollar, David & Hallward-Driemeier, Mary & Mengistae, Taye, 2005. "Investment Climate and Firm Performance in Developing Economies," Economic Development and Cultural Change, University of Chicago Press, vol. 54(1), pages 1-31, October.
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