Explaining Africa's (Dis)advantage
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.
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This paper was revised on February 26, 2013