Abstract
The aim of the study is to analyse the effects of the investment climate on the productivity of a manufacturing firm in Burkina Faso, specifically on its labour productivity, using the World Bank Enterprise Survey (WBES) data.
The three investment climate variables selected for the study are power outages, access to finance and business-government relationships, proxied by the percentage of time that senior managers spend on dealing with regulations. Seventeen manufacturing sectors are considered in the study. A detailed analysis is conducted on how the investment climate influences firms in relation to their size, age, sector and foreign ownership. Using the WBES data, we run regressions to analyse the effects of the investment climate variables on firm productivity for 2006 and 2009. We also conduct some descriptive analysis to identify the manufacturing firms’ relevant characteristics.
The findings suggest that access to finance is strongly positive and significant for the firms’ labour productivity. A 1% increase in access to finance leads to an increase in productivity by 1.51% in 2006 and 1.11% in 2009. Business-government relationships has a positive effect on firms in 2009. This indicates that an increase of 1% in senior managers’ time spend dealing with regulations leads to an increase in productivity by 0.014% in 2009. The power outage variable is not significant in explaining the firms’ labour productivity for the period of analysis.
The study found that two of the three selected variables of the investment climate influenced the productivity of firms in Burkina Faso. Moreover, those variables affect firm productivity in relation to certain firm-level characteristics. In effect, the findings show that firm size and foreign ownership positively influence firm productivity, but that the age of a firm had a negative and significant effect on firm productivity.