Impact of the business environment on output and productivity in Africa

Bah, El-hadj M. and Fang, Lei (2011): Impact of the business environment on output and productivity in Africa.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Business environment, Investment Climate, African Development, Productivity
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L23 - Organization of Production; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets ; Saving and Capital Investment ; Corporate Finance and Governance

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