Impact of the Business Environment on Output and Productivity in Africa

29 Pages Posted: 13 Jul 2011

See all articles by Elhadj M. Bah

Elhadj M. Bah

The University of Auckland

Lei Fang

Federal Reserve Bank of Atlanta

Date Written: July 12, 2011

Abstract

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

Bah, El-hadj M. and Fang, Lei, Impact of the Business Environment on Output and Productivity in Africa (July 12, 2011). Available at SSRN: https://ssrn.com/abstract=1884563 or http://dx.doi.org/10.2139/ssrn.1884563

El-hadj M. Bah (Contact Author)

The University of Auckland ( email )

Department of Economics
12 Grafton Rd
Auckland
New Zealand

HOME PAGE: http://homes.eco.auckland.ac.nz/ebah002/

Lei Fang

Federal Reserve Bank of Atlanta ( email )

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States
404-498-8057 (Phone)

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