Firm Size and Economic Development: Evidence from Ghana

Abstract Changes in the size distribution of firms are an important indicator of economic development, with prior work showing that average firm size increases with development. Data on firm size and how it has changed are limited for Africa but since 1987 it has seen sustained growth. Ghana has carried out firm censuses in 1962, 1987, 2003 and 2014. The average firm size in manufacturing reported in these censuses shows a large rise in average firm size when the economy contracted and, over the period of growth, a fall in average firm size from 18.8 to 4.4. We show that the firm size data from these censuses are not comparable. For the censuses for 1987 and beyond, we have microdata that enables us to present the firm size distribution on a consistent basis. Once the censuses are made comparable, they show a more modest fall in firm size from 1987 to 2003. However, the period of relatively rapid growth after 2003 saw no growth in average firm size. This finding is consistent with work showing that African growth has not led to the type of structural change which has occurred elsewhere.