_L. Fox and A.M. Oviedo_ _Institutions and Labor Market Outcomes in Africa_ (World Bank, 2008(b)) concluded that “DB measures the costs but not the benefits of regulation.” In particular, the report notes that seven out of DB’s ten indicators systematically reward de-regulation, regardless of the country’s initial regulatory environment, and reform is understood as reducing regulations, rather than increasing their potential benefits.

In our study, we cannot address these limitations; we use the DB indicators as we have no other comprehensive data sources. We use employment in manufacturing firms as our outcome variable. We cannot address the question of overall welfare of all employees and who are the winners and losers from this regulation in SSA.

# **III. Data**

We use surveys of manufacturing firms carried out by the world-wide Enterprise Survey project of the World Bank group between 2003 and 2007.<sup>10</sup> The firms surveyed are for the most part registered for tax purposes; they employ at least 5 employees.<sup>11</sup> The manager/owner of the firm is interviewed in detail about basic firm characteristics (age, legal status, etc.), as well as specific investment climate questions, for instance whether the firm has experienced power outages, what the delays have been when it requested a public service, how difficult it is to deal with public officers, etc. In addition, the manager is asked to rank the investment climate obstacles according to his/her opinion (infrastructure, access to finance, labor regulations, crime, corruption, etc., a total of 15 investment climate aspects). In short, the surveys contain a rich set of questions that can be used to relate firm performance to the investment climate of the country.

Within manufacturing, our sample has firms in the following sectors: food & beverages; chemicals, paints & pharmaceuticals; construction materials; metals; paper & printing; plastics; textiles, garments & leather; wood; and other manufacturing.

Our sample covers 12 civil law countries: Benin, Burkina Faso, Burundi, Cameroon, Cape Verde, Democratic Rep. Congo, Guinea, Madagascar, Mali, Mauritania, Rwanda, and Senegal), and 8 common law countries: Botswana, Gambia, Ghana, Kenya, Namibia, Swaziland, Tanzania, and Uganda.

In the next section we explore the links between the stringency of regulations, in particular labor regulations, the perceptions of firms regarding regulations, and labor dynamics in manufacturing in SSA.

# **IV. Institutions and manufacturing performance in Africa**

Most of the countries surveyed were experiencing a period of broad-based growth at the time of the survey, in many cases following a period of slower growth in the 1990s. An exception is Kenya, which in 2003 was just beginning to emerge from a period of very slow growth, caused in part by political uncertainty and stalemate. Manufacturing was growing as well, although it still accounts for less than 10 percent of overall value added in Sub-Saharan Africa.<sup>12</sup> Table 1 shows

> 10 Comprehensive information about these surveys is available at www.enterprisesurveys.org.

> 11 In some countries, separate surveys have been implemented for micro- and informal firms, but we are not using these data at present.

> 12 We exclude South Africa from our analysis.

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