Impact of the Business Environment on Output and Productivity in Africa
29 Pages Posted: 13 Jul 2011
Date Written: July 12, 2011
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.
Keywords: Business environment, Investment Climate, African Development, Productivity
JEL Classification: O16, O47, L23
Suggested Citation: Suggested Citation