Assessing the Impact of Infrastructure Quality on Firm Productivity in Africa: Cross-Country Comparisons Based on Investment Climate Surveys from 1999 to 2005

117 Pages Posted: 20 Apr 2016

See all articles by Álvaro Escribano

Álvaro Escribano

Universidad Carlos III de Madrid - Department of Economics

J. Luis Guasch

World Bank - Finance, Private Sector and Infrastructure Sector (LCSFP)

Jorge Pena

Universidad Carlos III de Madrid

Date Written: January 1, 2010

Abstract

This paper provides a systematic, empirical assessment of the impact of infrastructure quality on the total factor productivity (TFP) of African manufacturing firms. This measure is understood to include quality in the provision of customs clearance, energy, water, sanitation, transportation, telecommunications, and information and communications technology (ICT). Microeconometric techniques to investment climate surveys (ICSs) of 26 African countries are carried out in different years during the period 2002?6, making country-specific evaluations of the impact of investment climate (IC) quality on aggregate TFP, average TFP, and allocative efficiency. For each country the impact is evaluated based on 10 different productivity measures. Results are robust once controlled for observable fixed effects (red tape, corruption and crime, finance, innovation and labor skills, etc.) obtained from the ICSs. African countries are ranked according to several indices: per capita income, ease of doing business, firm perceptions of growth bottlenecks, and the concept of demeaned productivity (Olley and Pakes 1996). The countries are divided into two blocks: high-income-growth and low-income-growth. Infrastructure quality has a low impact on TFP in countries of the first block and a high (negative) impact in countries of the second. There is significant heterogeneity in the individual infrastructure elements affecting countries from both blocks. Poor-quality electricity provision affects mainly poor countries, whereas problems dealing with customs while importing or exporting affects mainly faster-growing countries. Losses from transport interruptions affect mainly slower-growing countries. Water outages affect mainly slower-growing countries. There is also some heterogeneity among countries in the infrastructure determinants of the allocative efficiency of African firms.

Keywords: Transport Economics Policy & Planning, Economic Theory & Research, E-Business, Labor Policies, Infrastructure Economics

Suggested Citation

Escribano, Álvaro and Guasch, José Luis and Pena, Jorge, Assessing the Impact of Infrastructure Quality on Firm Productivity in Africa: Cross-Country Comparisons Based on Investment Climate Surveys from 1999 to 2005 (January 1, 2010). World Bank Policy Research Working Paper No. 5191. Available at SSRN: https://ssrn.com/abstract=1547630

Álvaro Escribano (Contact Author)

Universidad Carlos III de Madrid - Department of Economics ( email )

Calle Madrid 126
Getafe, 28903
Spain
+34-91 6249854 (Phone)
+34-91 6249329 (Fax)

HOME PAGE: http://www.eco.uc3m.es/english/staff/contact_info/

José Luis Guasch

World Bank - Finance, Private Sector and Infrastructure Sector (LCSFP) ( email )

1818 H Street, NW
Washington, DC 20433
United States
202 473 8606 (Phone)
202 522 2106 (Fax)

Jorge Pena

Universidad Carlos III de Madrid ( email )

Avenida Universidad Carlos III, 22
Colmenarejo, 28270
Spain

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