_L. Fox and A.M. Oviedo_ _Institutions and Labor Market Outcomes in Africa_

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Despite the similar industry composition across groups, we do find a few differences in other firm characteristics: 24 percent of firms in the Francophone area are partly (or entirely) foreign owned, which is the case only for 13 percent in the Anglophone area. Thus, despite an apparently weaker investment climate, Francophone countries attract more foreign investment. In addition, 33 percent of firms in Anglophone countries provide training to their workers, which is slightly higher than in Francophone countries (29 percent). This potentially contradicts Pierre and Scarpetta’s finding that firms in more regulated environments tend to provide more training, since layoffs are more costly. Another interesting finding in our sample is the percentage of workers that firms “usually” report to the authorities: on average in Francophone countries firms report 67 percent of their workforce, whereas in Anglophone countries firms report only 49 percent. This indicates that _informal behavior is more prevalent in Anglophone countries,_ which again contradicts the idea that firms are reacting to more stringent regulations.<sup>22</sup>

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Rates of unionization are not unusually high, especially in the Francophone group, which also seems at odds with the picture of labor market rigidity from _Doing Business_ , above. In general we find that rates of unionization are not unusually high, especially in the Francophone group, which also seems at odds with the picture of labor market rigidity from _Doing Business_ , above. However, several studies of the African labor market point out that unions have by-and-large lost ground since the 1980s.<sup>23</sup> Overall, less than half of firms in Anglophone countries have any union presence at all, while only a quarter of Francophone firms have union presence. Table 12 shows that older firms have a more unionized labor force.<sup>24</sup> Among all the evidence on the irrelevance of EPL in Africa for employment growth, the survey data provide one piece of evidence that employment could be even higher without such strict EPL. In Table 7 we analyze firms’ responses to the following question “in the absence of restrictions to hiring and firing workers, how many workers would you currently employ? (Answer expressed as a percentage of current employment)” The first column takes the average of the absolute value of the deviation between potential employment and actual employment in firm _i_ : This number reflects labor demand at the firm, and deviations between actual and potential employment could in principle stem from frictions in the labor market caused by regulation. However, it is possible that this measure reflect changes in employment under “static” conditions, that is, firms only consider a scenario without restrictions to hiring and firing, without taking into account potential changes in wages that would occur if many firms decided

> 22 We have no measure of effectiveness of compliance measures.  It maybe Anglophone firms use informality more because the chances of getting caught are higher compared with the chances for Francophone firms, even though the cost of the  regulation on the firm maybe  higher in Francophone.

> 23 See Mazumdar and Mazaheri (2002), Fox and Gaal (2008). However, this does not imply that union members receive equal treatment as compared to non-members. See also Freeman (2007).

> 24 Fox and Oviedo (2008) also find that unionization increases with worker age and tenure, which may be one of the reasons for the high severance pay costs in Anglophone countries.

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