On the Evolution of the Firm Size Distribution in an African Economy

Justin Sandefur

No 2010-05, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: The size of the informal sector is commonly associated with low per capita GDP and a poor business environment. Recent episodes of reform and growth in several African countries appear to contradict this pattern. From the mid 1980’s onward, Ghana underwent dramatic liberalization and achieved steady growth, yet average firm size in the manufacturing sector fell from 19 to just 9 employees between 1987 and 2003. I use a new panel of Ghanaian firms, spanning 17 years immediately post-reform, to model firm dynamics that differ markedly from well-established ‘stylized facts’ in the empirical literature from other regions. In contrast with American and European firms, entry of new firms and selection on observable characteristics, rather than within-firm growth, dominates industrial evolution in Ghana.

Date: 2010
New Economics Papers: this item is included in nep-afr, nep-bec, nep-dev and nep-ent
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