First Come, First Served: Economic Reform and Corporate Investment in Africa

Christian Samen Otchia

Africagrowth Agenda, 2018, vol. 15, issue 4, 14-16

Abstract: We analyze the domestic investment by firms in Africa over the period of 2002-2017 as the region experienced rapid economic growth of about 5 percent per year. We use a rich panel dataset that contains a combination of detailed firm-level information, matched with Doing Business Distance to Frontier indicators. Analyzing this data, we find compelling evidence that investment growth was higher in countries where, before 2005, business environment was closer to the frontier. Our analysis shows that the pre-2005 buildup of ease of doing business seems to have intensified the accelerator effect of investment as economic growth has occurred in Africa and contributed to the subsequent sharp increases in corporate investment. We also find that the improvement in the business environment between 2005 and 2017 had a positive effect on investment that was smaller in magnitude than the initial conditions. In other words, there was a sign of first come first served.

Date: 2018
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