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Investment in Africa's Manufacturing Sector: A Four Country Panel Data Analysis
Author(s) -
Bigsten Arne,
Collier Paul,
Dercon Stefan,
Gauthier Bernard,
Gunning Jan Willem,
Isaksson Anders,
Oduro Abena,
Oostendorp Remco,
Pattilo Cathy,
Soderbom Mans,
Sylvain Michel,
Teal Francis,
Zeufack Albert
Publication year - 1999
Publication title -
oxford bulletin of economics and statistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.131
H-Index - 73
eISSN - 1468-0084
pISSN - 0305-9049
DOI - 10.1111/1468-0084.00140
Subject(s) - profit (economics) , panel data , investment (military) , manufacturing sector , economics , developing country , econometrics , fixed effects model , structural equation modeling , business , monetary economics , microeconomics , macroeconomics , economic growth , mathematics , statistics , politics , political science , law
Firm level data for the manufacturing sector in Africa, presented in this paper, shows very low levels of investment. The importance of profit effects on investment is investigated using a flexible accelerator, a specification based on the Euler equation and a simple generalisation of these specificiations. There are controls for firm fixed effects. It is shown that the profit effect is very similar for both the accelerator and Euler equation specifications. A comparison with other studies shows that, for small firms, the effect is much smaller in Africa than for other countries. Reasons for the relative insensitivity of investment to profits in African firms are suggested. For the most general specification tested there are no significant differences in the size of the profit effect across the four countries in the study.