Discussion Paper Details

Please find the details for DP9859 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

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

Author(s): Sebnem Kalemli-Ozcan and Bent E Sørensen

Publication Date: March 2014

Keyword(s): Financing Obstacles, Firms, Investor Rights, Marginal Product of Capital and Misallocation

Programme Area(s): Development Economics and International Macroeconomics

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.

For full details and related downloads, please visit:

Bibliographic Reference

Kalemli-Ozcan, S and Sørensen, B. 2014. 'Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa'. London, Centre for Economic Policy Research.