Investment in Africa's Manufacturing Sector: A Four Country Panel Data Analysis |
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| Authors: | Arne Bigsten Paul Collier Stefan Dercon Bernard Gauthier Jan Willem Gunning ers Isaksson Abena Oduro Remco Oostendorp Cathy Pattilo Mans Soderbom Michel Sylvain Francis Teal & Albert Zeufack |
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| Institution: | University of Goteborg,;University of Oxford;World Bank,;University of Oxford and Katholieke Universiteit Leuven,;Ecole des Hautes Etudes Commerciales, Montreal,;Free University, Amsterdam;University of Oxford,;University of Goteborg,;University of Ghana, Legon,;Free University, Amsterdam,;Research Department, IMF,;University of Goteborg,;Ecole des Hautes Etudes Commerciales, Montreal,;University of Oxford,;World Bank |
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| Abstract: | Firm level data for the manufacturing sector in Africa, presented in this paper, shows very low levels of investment. The importance of profit effects on investment is investigated using a flexible accelerator, a specification based on the Euler equation and a simple generalisation of these specificiations. There are controls for firm fixed effects. It is shown that the profit effect is very similar for both the accelerator and Euler equation specifications. A comparison with other studies shows that, for small firms, the effect is much smaller in Africa than for other countries. Reasons for the relative insensitivity of investment to profits in African firms are suggested. For the most general specification tested there are no significant differences in the size of the profit effect across the four countries in the study. |
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