information and communications technology (ICT). We also want to identify infrastructure factors with statistically significant impacts on TFP, country by country. In the econometric evaluation we use 10 different measures of TFP and show that the results are robust—no matter what measure of TFP is used—if we follow the econometric methodology of Escribano and Guasch (2005, 2008), and Escribano et al. (2008).

For the empirical analysis of infrastructure’s constraints on TFP, we go down to the firm level since infrastructure is one of the key elements of a country-specific IC, and a significant component of country competitiveness. To provide reliable and robust estimates of the impact of infrastructure on economic performance is not a straightforward task. As we will see later on, we have to deal with the heterogeneity of the countries included in our sample, and the endogeneity of explanatory variables (inputs and IC variables) in several dimensions due to unobservable fixed effects, measurement errors, missing observations, and so on. To solve these problems, we take advantage of the useful and rich firm-level information provided by the ICSs undertaken by the World Bank in Africa from 2002 to 2006. These surveys capture firm-level information in a range of areas related to economic performance: infrastructure, financing, governance, corruption, crime, regulation, tax policy, labor relations, conflict resolution, supplies and marketing, quality, technology, and training, among others. These surveys offer information on the production function (PF) variables over one, two, or three years, depending on the African country. But for infrastructure and other IC and plant control (C) variables they only provide information for a single year. We will see how we can use this valuable information to evaluate how firms operate in Africa and to identify the main obstacles to productivity improvements.

Section 2 of this report clarifies the link between this type of empirical work and existing literature on infrastructure and productivity. The properties and quality of the ICSs are analyzed in section 3. Why we classify the IC factors in broad categories or groups will also be discussed, together with the infrastructure variables (INFs) used. In section 4 we present the econometric methodology we use to estimate the impact of infrastructure and other IC variables and C characteristics on TFP. Once we have estimated the infrastructure and other IC elasticities and semi-elasticities on productivity, we evaluate the effects of infrastructure on aggregate productivity and on allocative efficiency, using the Olley and Pakes (O&P, 1996) decomposition. The main empirical results are described in the remaining sections. In particular, section 5 focuses on the relative importance of infrastructure in the IC of each country. Section 6 presents the empirical results country by country, and section 7 includes the main conclusions. Most of the tables and figures are included in the Appendix at the end of the paper.

# **2. How does infrastructure quality affect economic performance?**

Much literature discusses the different ways that infrastructure affects growth and other development outcomes at the macroeconomic level. For example, the World Bank’s landmark World Development Report (1994) highlighted multiple links between infrastructure and development and emphasized how 11