**I. Introduction**

Concerns about job creation and labor market outcomes are central to the public debate and policy agenda in Ghana, and creating more and _productive_ jobs is a pressing challenge (World Bank 2016). Many countries in Africa suffer high rates of under-employment or low-productivity employment. In addition, African formal firms, at any age level, tend to be systematically smaller than firms in other regions of the world (Iacovone et al, 2014). Business environment measures such as access to finance, infrastructure, legal rights, availability of skilled labor, access to land as well as certain types of firm characteristics (foreign ownership and/or export status) explain only 40 percent of the difference of the size gap between African firms and firms elsewhere (Iacovone et al, 2014). So what prevents firms from growing? Which are the characteristics of job-creating firms in Ghana?

Ghana’s economic growth has outpaced that of most of its African, lower-middle-income peers during the past two decades. Following substantial economic reform in the early 1990s, Ghana has maintained a steady trajectory of economic growth for nearly two decades. Real GDP growth rates averaged more than 4.3 percent per annum between 1991 and 2000, increased to around 5 percent between 2000 and 2005, and accelerated further to 8 percent between 2006 and 2012 — peaking at 14 percent in 2011, when Ghana started producing oil. In 2012, the GDP growth rate slowed down, and it fell to 4 percent in 2014. Economic growth has further been fueled by strong price increases in its main commodity exports, cocoa and gold, for which prices more than tripled between 2000 and 2010 and the start of commercial oil production in 2011, which sparked consumption and investment booms. In 2011, Ghana achieved middle-income status.

This growth has been accompanied by a continued structural transformation from agriculture to services, remarkable poverty reduction, and a parallel migration from rural areas to urban ones. The share of agriculture in GDP has declined steadily, especially in the past decade, but agriculture remains the mainstay for many of the poor. In the twenty year period between 1994 and 2013, the value added of the Ghanaian economy nearly tripled, in real terms (Figure 1). The transport and agriculture sectors were the two largest drivers of this growth in the 1990s; from 2004 to 2013, construction accounted for a substantially larger portion of growth (roughly 15 percent) than in the 10 years prior. Most notably, following the discovery of oil reserves in 2010, the extractives industry has been the largest single source of value added growth, accounting for roughly a third of growth since 2010. The increase in the share of services represents increases in information and communications technology (ICT), transport, finance, and the increasing number of microenterprises operating retail and wholesale activities. By contrast, Ghanaian manufacturing has remained relatively static over the same period; in fact as in several other African countries, the share of the manufacturing sector has declined over time. Between 2005 and 2012, the manufacturing sector contributed only 5 percent to the total increase in value added.

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