The impact of export diversification on business startups in Africa

Abstract

This paper aims to examine the impact of export diversification on business formation in Africa. The study used a panel dataset comprising 10 African countries (Algeria, Gabon, Lesotho, Morocco, Nigeria, Sierra Leone, Togo, Tunisia, Uganda and Zambia) observed annually from 2008 to 2018. The model was estimated using an instrumental variable regression approach within a count data framework and the difference-in-difference method. Main findings of the study demonstrate that (i) export diversification facilitates the formation of new businesses in the sampled countries, (ii) the odds of a business start-up increase by 1.7 – 3.5 times in response to a percentage point increase in export diversification, and finally (iii) business start-ups are at least 95 percent higher in countries with high export diversification compared to countries with narrow export baskets. These findings emphasize the need for policies aimed at moving away from concentrated export baskets towards more diversified ones to leverage entrepreneurial effort in the selected African countries.

Keywords: {'name': 'Export diversification'}, {'name': 'Business start-ups'}, {'name': 'Africa'}, {'name': 'economic development'}

Authors & affiliations

Brian Mazorodze
Affiliation not supplied

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