The performance of manufacturing firms in Burkina Faso : 1990-2010

Abstract: This study investigates firm dynamics in the manufacturing sector in Burkina Faso. Using panel data from the annual manufacturing firm census over the period 1990 to 2010, the study first uses the Herfindahl-Hirschman Index (HHI) to examine the degree of manufacturing sector concentration and how this has changed over time. Moreover, the statistical distribution of firms over time is used to explain the contribution of selection and growth to the evolution of manufacturing firm size distribution. Furthermore, the study uses two econometric approaches to examine the survival of manufacturing firms in Burkina Faso. The first method is the linear probability model (LPM) predicting survival over 10-year periods. The second approach exploits the availability of annual data to estimate a duration model, specifically the Cox proportional hazard model, over the period 1990 to 2010. The results of the Herfindahl-Hirschman Index (HHI) show that the manufacturing sector in Burkina Faso, although becoming less and less concentrated over time, is still highly concentrated. Moreover, the results of the density estimate show that decline rather than selection explains the evolution of manufacturing firm size distribution in Burkina Faso. The results of the LPM furthermore indicate that size, age and growth positively influence the performance and the survival of manufacturing firms. Using the Cox model, the results show that large, old and growing firms were more likely to perform well or survive than small-sized, young and declining manufacturing firms over the period 1990 to 2010. The results of the Cox proportional model support the findings of the LPM model, whereby size, age and growth are the main determinants of the survival of manufacturing firms in Burkina Faso. From the above, the study suggests possible policy measures in order to reinforce the performance of manufacturing firms in terms of firm dynamics and survival.M.Phil. (Industrial Policy