Explaining Africa's (Dis)advantage

NBER Working Paper No. 18683

Issued in January 2013, Revised in February 2013

NBER Program(s):Environment and Energy Economics, International Trade and Investment



Africa's economic performance has been widely viewed with pessimism. In this paper, we use firm-level data for around 80 countries to examine formal firm performance. Without controls, manufacturing African firms perform significantly worse than firms in other regions. They have lower productivity levels and growth rates, export less, and have lower investment rates. Once we control for geography, political competition and the business environment, formal African firms lead in productivity levels and growth. Africa's conditional advantage is higher in low-tech than in high-tech manufacturing, and exists in manufacturing but not in services. The key factors explaining Africa's disadvantage at the firm level are lack of infrastructure, access to finance, and political competition.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w18683

Published: Harrison, Ann E. & Lin, Justin Yifu & Xu, Lixin Colin, 2014. "Explaining Africaâs (Dis)advantage," World Development, Elsevier, Elsevier, vol. 63(C), pages 59-77. citation courtesy of

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