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Impact of the business environment on output and productivity in Africa

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  • Bah, El-hadj M.
  • Fang, Lei

Abstract

Africa is the poorest part of the world and it has the worst environment for long term business success by most standards. Empirical works normally find a negative correlation between income per worker and measures for poor business environment. This paper develops a general equilibrium model to assess the quantitative effects of the business environment, including access to finance, regulation, crime, corruption and infrastructure, on output and TFP for 30 Sub-Saharan African countries. We find that the quantitative effects of these areas of the business environment are large. They together can explain about 67% of the variation in income per capita relative to the US. Improving these dimensions of the business environment will be key for the long term development of the continent.

Suggested Citation

  • Bah, El-hadj M. & Fang, Lei, 2011. "Impact of the business environment on output and productivity in Africa," MPRA Paper 32225, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:32225
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    Cited by:

    1. Brixiova, Zuzana & Égert, Balázs, 2017. "Entrepreneurship, institutions and skills in low-income countries," Economic Modelling, Elsevier, vol. 67(C), pages 381-391.
    2. Jeremy Greenwood & Juan M. Sanchez & Cheng Wang, 2010. "Financing Development: The Role of Information Costs," American Economic Review, American Economic Association, vol. 100(4), pages 1875-1891, September.
    3. Wilfried Kouamé & J.-A Tapsoba, 2018. "Structural Reforms and Firms’ Productivity: Evidence from Developing Countries," Post-Print hal-01723100, HAL.
    4. 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.
    5. repec:oup:jafrec:v:27:y:2018:i:3:p:251-273. is not listed on IDEAS
    6. 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.
    7. Era Dabla-Norris & Giang Ho & Annette J Kyobe, 2016. "Structural Reforms and Productivity Growth in Emerging Market and Developing Economies," IMF Working Papers 16/15, International Monetary Fund.
    8. 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.
    9. Diagne, Youssoupha S, 2013. "Impact of business environment on investment and output of manufacturing firms in Senegal," MPRA Paper 54227, University Library of Munich, Germany.
    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.
    11. repec:eee:wdevel:v:97:y:2017:i:c:p:178-198 is not listed on IDEAS

    More about this item

    Keywords

    Business environment; Investment Climate; African Development; Productivity;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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