Investment climate and firms exports in Egypt : when politics matter

Abstract EN

The objective of this paper is to explore the nexus between exports performance and components of the investment climate.

This paper contribution is twofold: first, the paper fills the gap in the available literature by combining both the literature on productivity and investment climate and that on exports and productivity.

Second, we use firm-level data to examine the differential impact of investment climate on both the intensive and the extensive margins using the World Bank enterprise survey for Egypt.

Our results suggest that in fact, politics do matter for two reasons.

First, the most important constraint affecting firms’ exports is political instability despite investment reforms.

Second, the ability of state owned firms to become exporters, despite their limited competitiveness once they enter the exports market.

Finally, tax policy and competition from the informal sector are the most important impediments that hinder both the increase in the number of exporters and the quantity of exports.

Imported inputs do also matter for both of the two margins.