Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa

Sebnem Kalemli-Ozcan and Bent Sorensen

No 18030, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study capital misallocation within and across 10 African countries using the World Bank Enterprise Surveys. First, we compare the extent of misallocation among firms within countries. We document high variation in firms' marginal product of capital (MPK), implying that countries could produce significantly more with the same aggregate capital stock if capital were allocated optimally. Such variation differs from country to country with some African countries (success stories) closer to developed country benchmarks. Small firms and non-exporters have less access to finance and have higher returns to capital in general. Self reported measures of obstacles to firms' operations suggest access to finance is the most important obstacle: A firm with the worst access to finance has MPK 45 percent higher than a firm with the worst access to finance as a result of low capital per worker. We compare average levels of the MPK across countries, finding evidence that the strength of property rights and the quality of the legal system help explain country-level differences in capital misallocation.

JEL-codes: F40 O10 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-afr and nep-dev
Note: IFM
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Published as Misallocation, Property Rights, and Access to Finance: Evidence from within and across Africa , Sebnem Kalemli-Ozcan, Bent E. Sørensen. in African Successes, Volume III: Modernization and Development , Edwards, Johnson, and Weil. 2016

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Related works:
Chapter: Misallocation, Property Rights, and Access to Finance: Evidence from within and across Africa (2014)
Working Paper: Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa (2014)
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