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Working Paper 328 - The Cost of Inaction: Obstacles and Lost Jobs in Africa

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Abstract

In a competitive market, the constant “churning” of firms into and out of business boosts productivity, economic growth, and net job creation. Without competitive markets, however, firm exit, and the failures of firm entry could be due to obstacles other than competition and innovation. In African countries, incumbent firms and potential entrants face immense obstacles: a difficult political environment, burdensome business regulations, inadequate infrastructure, and limited access to finance. This report investigates the extent to which such obstacles hinder job creation in general and firm dynamism, particularly. Using World Bank Enterprise Survey (ES) panel data that covers 18 African countries, the report quantifies the number of jobs lost due to obstacles. It finds that a single obstacle reduces annual employment growth by 0.1–0.34 percentage point. Hence, by removing key business obstacles, Africa could boost new job creation and save many existing high-quality jobs. JEL Classification: D22; L11; L25; O43; J23

Suggested Citation

  • Andinet Woldemichael & Margaret Joldowski, 2019. "Working Paper 328 - The Cost of Inaction: Obstacles and Lost Jobs in Africa," Working Paper Series 2454, African Development Bank.
    • Handle: RePEc:adb:adbwps:2454
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    More about this item

    Keywords

    Unemployment; labor demand; constraints; firm dynamism; doing business;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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