Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa

Sebnem Kalemli-Ozcan, Bent E. Sørensen

This chapter is a preliminary draft unless otherwise noted. It may not have been subjected to the formal review process of the NBER. This page will be updated as the chapter is revised.

Chapter in forthcoming NBER book African Successes: Modernization and Development, Volume 3, Sebastian Edwards, Simon Johnson, and David N. Weil, editors
Forthcoming from University of Chicago Press
in African Successes Project

We study capital misallocation within and across 10 African countries using the World Bank Enterprise Surveys. First, we compare the extent of misallocation among firms within countries. We document high variation in firms' marginal product of capital (MPK), implying that countries could produce significantly more with the same aggregate capital stock if capital were allocated optimally. Such variation differs from country to country with some African countries (success stories) closer to developed country benchmarks. Small firms and non-exporters have less access to finance and have higher returns to capital in general. Self reported measures of obstacles to firms' operations suggest access to finance is the most important obstacle: A firm with the worst access to finance has MPK 45 percent higher than a firm with the worst access to finance as a result of low capital per worker. We compare average levels of the MPK across countries, finding evidence that the strength of property rights and the quality of the legal system help explain country-level differences in capital misallocation.

download in pdf format
   (514 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

This chapter first appeared as NBER working paper w18030, Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa, Sebnem Kalemli-Ozcan, Bent E. Sorensen
Users who downloaded this chapter also downloaded these:
Cook Were the Nigerian Banking Reforms of 2005 A Success…And for the Poor?
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us