Next, we compare key variables in terms of quantiles that allow assessing distance to the frontier. For the variables in Figure 8 above, we compute Ghana’s quantile within the two respective benchmark groups, ‘aspirational peers’ and ‘comparator countries’ which have been identified according to four criteria that would make a country relatively similar to Ghana.<sup>19</sup> That means, if Ghana performs best on the respective variable (within the comparison group) it gets a value of (close to) 1 and if it performs worst, a value of (close to) 0. A value of 0.5 would accordingly indicate that 50 percent of countries do better, whereas the other 50 percent do worse.<sup>20</sup> This exercise can inform us where policy gaps are particularly large compared to comparator countries and thus helps to prioritize reforms as large gaps usually entail that advancement in this dimensions is not particularly costly and that the existence of the gap might be a particularly binding constraint for further economic development.

The results are depicted in Figure 9. As one can see, roads and institutional quality (proxied by the polity2 index) do not seem to be areas of urgent need for policy action: Ghana comes close to the best performers in those categories, even if compared to the aspirational peers with a much higher income level. Key gaps, however, exist concerning inflation management and aspects of infrastructure, but also regarding schooling, trade openness, and financial development. From Figure 9 it is obvious that Ghana is considerably lagging behind in terms of inflation management and telephone lines: for both variables, it is the worst performer within both peer groups. The same is true for schooling and mobile phones within the group of aspirational peers, which have a much higher income level though. But Ghana also does worse than over half of the countries within the group of comparably similar countries in those two variables (right panel). Finally, Ghana falls short of more than 50 percent of countries in both peer groups concerning trade openness and levels of credit to GDP, a measure for financial development.<sup>21</sup> Additional insights come from the results of the World Bank Enterprise Surveys. For the Ghana survey, business owners and top managers in 720 firms were interviewed from December 2012 through July 2014. Key data are presented in Figure 10 and compared to results from other SubSaharan African countries. Consistent with our benchmarking exercise, access to finance and key aspects of infrastructure are seen as major business constraint by firms—to an extent beyond the Sub-Sahara African average. This is especially true for electricity and water insufficiencies, while transportation seems to be less of an issue (consistent with our benchmarking exercise). The only deviation arises in the area of schooling, where our benchmarking exercise identifies a major gap whereas only 15.3 percent of surveyed firm managers see an inadequately educated labor force as a major business constraint. At the same time, Ghana ranks last in PISA scores for students’ mathematics and science performance among 76 countries analyzed. Note, however, that surveys were conducted with existing enterprises only. With a broader educational background of its labor force, new firms may possibly have developed in more productive sectors.

> 19 These criteria were whether a country is/has: a) commodity exporter (World Bank DEC definition), b) agrarian (above world average), c) population between 3 million and 55 million, and d) income level (USD 900 to 2,200). This methodology is based on a World Bank tool called “Find My Friends” that allows to compare development data to identify common characteristics of countries.

> 20 More precisely, we calculate quantiles by Hazen’s rule, i.e. the quantile is given as Ghana’s (inverse) rank (within the respective comparison group) minus 0.5, and then divided by the number of countries in the respective comparison group. Note, accordingly, that the best (worst) performer will not get a value exactly equal to 1 (0). We multiplied variables with a negative effect on growth (government consumption and inflation) with (-1) for the ease of interpretation.

> 21 The shortcomings in Ghana’s financial system are also investigated in Biekbe (2011).

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