Publication: Taxing the Good? Distortions, Misallocation, and Productivity in Sub-Saharan Africa
Abstract
This paper uses comprehensive and
comparable firm-level manufacturing census data from four
Sub-Saharan African countries to examine the extent, costs,
and nature of within-industry resource misallocation across
heterogeneous firms. The paper finds evidence of severe
misallocation in which resources are diverted away from
high-productivity firms toward low-productivity ones in all
four countries, although the magnitude differs across
countries. The paper shows that a hypothetical reallocation
of resources that equalizes marginal returns across firms
would increase manufacturing productivity by 31.4 percent in
Cote d'Ivoire and as much as 162.7 percent in Kenya.
The paper emphasizes the importance of the quality of the
underlying data, by comparing the results against those from
the World Bank Enterprise Surveys. The comparison finds that
the survey-based results underestimate the extent of
misallocation vis-a-vis the census. Finally, the paper finds
that the size of existing distortions is correlated with
various measures of business environment, such as lack of
access to finance, corruption, and regulations.
Link to Data Set
Citation
“Cirera, Xavier; Fattal Jaef, Roberto N.; Maemir, Hibret B.. 2017. Taxing the Good? Distortions, Misallocation, and Productivity in Sub-Saharan Africa. Policy Research Working Paper;No. 7949. © World Bank, Washington, DC. http://hdl.handle.net/10986/25958 License: CC BY 3.0 IGO.”
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