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STATE-BUSINESS RELATIONS, INVESTMENT CLIMATE REFORM AND FIRM PRODUCTIVITY IN SUB-SAHARAN AFRICA

Authors


  • This paper is written for the Research Programme Consortium for Institutions and Pro-Poor Growth and funded by UK DFID. We are grateful to participants at the IPPG workshop in Manchester, May 2007; and the ABCDE, Slovenia, May 2007 for helpful comments and suggestions. The views expressed in this paper are of the authors, and do not necessarily represent those of the ODI. Any errors and opinions expressed are the sole responsibility of the authors.

Correspondence to: Dirk Willem te Velde, Overseas Development Institute; 111 Westminster Bridge Road, London SE1 7JD, UK.

E-mail:dw.tevelde@odi.org.uk

Abstract

This paper examines whether an effective state-business relationship, facilitated by an organised private sector, improves firm performance in seven sub-Saharan African countries: Benin, Ethiopia, Madagascar, Malawi, Mauritius, South Africa and Zambia. The findings reveal that, on average, state-business relationships enhance firm productivity by about 25–35 per cent in sub-Saharan African firms. This effect appears to set in through an improved investment climate—including reduced corruption, better provision of public utilities and information technology development—and higher labour productivity. These gains are not confined to small and medium sized firms but have a similar positive impact on large firms. Further, both domestic and foreign-owned firms appear to benefit from joining business associations, although the impact is somewhat larger for the latter. Copyright © 2012 John Wiley & Sons, Ltd.

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