Publication: Assessing the impact of infrastructure quality on firm productivity in Africa: Cross‐country comparisons based on investment climate surveys from 1999 to 2005
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2009-11
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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). We apply
microeconometric techniques to investment climate surveys (ICSs) of 26 African countries 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 we evaluated this impact based on 10 different productivity measures. Results are robust
once we control for observable fixed effects (red tape, corruption and crime, finance, innovation and
labor skills, etc.) obtained from the ICSs. We ranked African countries 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). We divided countries into two blocks: high‐incomegrowth
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. We found 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.
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Africa, Infrastructure, Total factor productivity, Investment climate, Competitiveness