Measuring Firm-Level Inefficiencies in the Ghanaian Manufacturing Sector

Andrea Szabo

Economic Development and Cultural Change, 2018, vol. 66, issue 3, 447 - 487

Abstract: This paper measures firm-level inefficiencies in input use among manufacturing firms in Ghana by explicitly estimating their production function. I find that the fraction of undercapitalized firms is 46%, but overall firms use 77% more capital and 40% less labor than would be optimal. Underutilization of labor is especially prevalent among firms with a unionized workforce. Firms with formal loans and firms with more human capital are closer to their efficient capital stock. The findings suggest large potential gains in value added from adjusting input use in the optimal direction.

Date: 2018
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