Impact of employment protection legislation on employment and exporting in select African countries

Figures & data

Table 1: Descriptive statistics

Variable		Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Employment / Size	Mean	66.24	79.34	23.23	183.77	51.99	51.64	39.01
	SD	128.59	239.90	97.57	395.19	108.39	239.53	154.38
	Minimum	5	1	1	5	5	5	1
	Maximum	1 000	3 000	3 000	3 000	1 118	4 000	4 000
Export Intensity	Mean	8.486	6.19	0.47	26.47	2.34	4.42	2.369
	SD	23.325	17.12	4.72	39.88	8.86	16.82	11.731
	Minimum	0	0	0	0	0	0	1
	Maximum	100	100	100	100	75	100	100
Job Reallocation	Mean	3.404	1.045	0.338	16.129	0.418	0.010	0.748
	SD	23.971	8.161	7.080	119.45	2.645	0.171	16.499
	Minimum	0	0	0	1	0	0	0
	Maximum	250	150	300	1 000	34	3	1 000
Foreign	Mean	0.474	0.110	0.015	0.386	0.139	0.176	34.074
	SD	0.502	0.313	0.121	0.490	0.347	0.381	128.157
	Minimum	0	0	0	0	0	0	0
	Maximum	1	1	1	1	1	1	4 000
Innovate^a	Mean	0.667	0.352		0.586	0.648	0.596	0.160
	SD	0.473	0.478		0.496	0.478	0.491	0.367
	Minimum	0	0		0	0	0	0
	Maximum	1	1		1	1	1	1
Age	Mean	11.342	16.105	15.278	11.779	14.277	12.828	15.152
	SD	8.515	14.571	10.348	10.803	12.088	10.124	11.258
	Minimum	1	1	2	1	1	1	1
	Maximum	37	87	158	47	98	79	158
Sales	Mean	7 765 031	4.02 × 10^8	8.71 × 10^7	1.51 × 10^7	1.56 × 10^9	1.99 × 10^9	1 544 166
	SD	1.95 × 10^7	3.39 × 10^9	7.40 × 10^7	3.20 × 10^7	8.94 × 10^9	1.07 × 10^10	2.00e × 10^7
	Minimum	0	40 000	0	980 000	650 000	1 000 000	0
	Maximum	1.72 × 10^8	7.50 × 10^10	1.90 × 10^10	1.90 × 10^8	1.35 × 10^11	1.36 × 10^11	1.11 × 10^9
Location	Mean	0.807	0.597	0.050	0.214	0.689	0.818	0.249
	SD	0.396	0.491	0.218	0.413	0.464	0.387	0.432
	Minimum	0	0	0	0	0	0	0
	Maximum	1	1	1	1	1	1	1
Export Propensity	Mean	0.193	0.201	0.013	0.371	0.128	0.124	0.068
	SD	0.396	0.401	0.115	0.487	0.335	0.330	0.252
	Minimum	0	0	0	0	0	0	0
	Maximum	1	1	1	1	1	1	1

Source: Authors' own calculations from the Investment Climate Assessment survey data.

Notes: SD, standard deviation. Export is a dummy variable equal to 1 if the firm directly exports some of its products/services. Export Intensity is the percentage of sales gained from exports. Foreign is a dummy variable equal to 1 if more than 10% of the firm is owned by foreign individuals or entities. Innovate is a dummy variable equal to 1 if the firm introduced a new product into the market or significantly improved a product/service in the last three years. Age is a firm's age and is calculated by subtracting the year the firm started operations from the survey year. Location is a dummy variable equal to 1 if the firm is located in the capital city. Obstacle measures the extent to which labour regulations are an obstacle to a firm's operations; it takes values from 1 to 5 (with 1 standing for no obstacle and 5 standing for very severe obstacle). Fire is the number of workers a firm would fire if it did not have to comply with labour regulations. Hire is the number of workers a firm would hire if it did not have to comply with labour regulations. Job reallocation is the summation of Fire and Hire. Investment is the amount spent purchasing machinery, vehicles, equipment, land and building in the previous year (a year prior to the survey year). Employment is the number of employees employed by the firm. ^aThe questionnaire on Nigeria does not have the question on innovation.

Table 2: Percentage of firms whose firing and hiring decisions were affected by employment regulations

Country	Observations	Mean employment	Hiring and firing not affected (%)	Only firing affected (%)	Only hiring affected (%)	Hiring and firing affected (%)	Number fired	Number hired	Net (hire less fire)	Job reallocation
Botswana	114	66.24	82.46	5.26	2.63	11.00	23	365	342	388
Tanzania	272	51.99	95.60	3.30	0.00	0.73	82	32	–50	114
Uganda	307	51.64	99.67	0.00	0.33	0.00	0	3	3	3
Nigeria	2 387	23.23	98.41	0.38	0.80	0.42	545	523	–22	1 068
Swaziland	70	183.77	81.43	8.57	4.29	5.71	68	1 061	993	1 129
Kenya	781	79.34	92.19	2.30	1.92	3.59	343	473	130	816

Source: Authors' own calculations from the Investment Climate Assessment survey data.

Table 3: Results for the impact of labour regulation on employment

Independent variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	0.005***	0.005***	0.006***	–0.003	0.035***	–0.325	0.008***
	(3.84)	(2.93)	(2.95)	(–0.07)	(2.97)	(–1.38)	(5.02)
Foreign	0.140	0.108	0.239*	0.060	0.298*	0.221*	0.522***
	(0.70)	(0.85)	(1.86)	(0.20)	(1.97)	(1.85)	(6.79)
Innovate	0.161	0.434***		–0.444	0.047	0.200**
	(0.72)	(4.91)		(–1.46)	(0.51)	(2.30)
Age	0.296*	0.114*	0.079***	–0.302	0.162**	0.279***	0.159***
	(1.96)	(1.91)	(3.899)	(–1.50)	(2.25)	(3.66)	(6.94)
Sales	0.350***	0.396***	0.357***	0.528***	0.383***	0.362***	0.311***
	(6.57)	(17.82)	(36.34)	(4.97)	(14.84)	(15.15)	(38.55)
Location	0.075	0.165**	0.388***	–0.685*	0.046	0.005	–0.003
	(0.36)	(2.03)	(7.67)	(–1.71)	(0.44)	(0.050	(–0.07)
Country dummy^a							0.452***
							(9.94)
Constant	–2.704***	–3.899***	–3.302***	–2.523	–4.527***	–4.622***	–2.780***
	(–3.69)	(–11.83)	(–21.23)	(–1.63)	(–10.990	(–10.66)	(–22.00)
Observations	90	578	2 740	51	246	280	3 985
R-squared	0.48	0.59	0.58	0.58	0.66	0.61	0.52
F()	36.26	157.32	459.70	15.74	97.50	70.71	509.05
P-value	0.000	0.000	0.0000	0.0000	0.0000	0.0000	0.000

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%. ^a Kenya is the reference country.

Table 4: Results for the impact of labour regulation on investment

Independent variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	0.009***	–0.008*	0.005**	0.026	–5.930	–0.751	0.001
	(4.68)	(–1.77)	(2.47)	(0.38)	(–0.75)	(–0.54)	(0.73)
Foreign	0.444	0.328	0.423*	–1.495***	8.510	1.180*	–0.034
	(0.89)	(1.17)	(1.90)	(–3.00)	(0.82)	(1.68)	(–0.24)
Innovate	–0.449	0.408*		0.661	–4.620	0.398
	(–0.90)	(1.96)		(1.31)	(–0.75)	(0.780
Age	0.081	0.103	–0.130*	–0.261	1.710	0.368	–0.071
	(0.19)	(0.75)	(–1.89)	(–0.960	(1.39)	(0.82)	(–1.25)
Sales	0.432***	0.638***	0.710***	1.031***	3.470**	0.917***	0.778***
	(2.95)	(13.18)	(27.36)	(5.84)	(2.04)	(6.53)	(41.61)
Location	0.177	0.162	0.594***	1.178**	–9.440*	–0.747	0.408***
	(0.26)	(0.84)	(4.72)	(2.24)	(–1.66)	(–1.19)	(4.69)
Country dummy							–0.338***
							(–3.30)
Constant	5.459***	2.981***	2.639***	–3.056	–5.610**	1.690***	1.424***
	(2.79)	(3.89)	(6.49)	(–1.18)	(2.20)	(6.64)	(4.87)
Observations	90	578	2 740	42	247	279	2 125
R-squared	0.21	0.54	0.46	0.60	0.10	0.60	0.57
F()	654.10	59.17	259.11	8.98	1.98	70.71	396.68
P-value	0.0000	0.0000	0.0000	0.000	0.104	0.000	0.000

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%.

Table 5: Results for the impact of labour regulation on the decision to export

Independent Variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	–0.048	–0.001	0.017***	0.448*	–0.018	0.020	0.005*
	(–0.66)	(–0.14)	(2.66)	(1.65)	(–0.48)	(0.011)	(1.77)
Foreign	0.426	0.463***	0.410	1.449***	0.4910	0.582	0.878***
	(1.12)	(2.66)	(1.50)	(2.68)	(1.74)	(0.530	(7.92)
Innovate	0.252	0.504***		0.132	0.209	0.133
	(0.73)	(3.61)		(0.26)	(0.82)	(0.53)
Age	–0.116	0.251***	0.330**	–0.110	0.330*	0.965**	0.173***
	(–0.39)	(2.76)	(2.08)	(–0.31)	(1.91)	(2.54)	(2.85)
Sales	0.176*	0.265***	0.336***	0.471***	0.218***	0.324***	0.237***
	(1.73)	(6.53)	(7.10)	(3.06)	(3.76)	(5.25)	(11.57)
Location	0.840	0.048	0.460***	–0.855	–0.245	–0.140	0.243***
	(1.58)	(0.36)	(2.47)	(–1.19)	(–1.02)	(–0.53)	(2.95)
Country dummy							0.942***
							(11.53)
Constant	–4.361***	–6.367***	–9.072***	–7.858***	–6.219***	–8.657***	–6.51***
	(–3.46)	(–8.95)	(–10.74)	(–3.05)	(–5.45)	(–6.68)	(–17.62)
Observations	90	578	2 740	67	247	306	3 986
R-squared	0.13	0.24	0.38	0.43	0.19	0.34	0.35
F()	12.7	109.53	106.77	19.52	38.68	46.58	532.75
P-value	0.047	0.000	0.0000	0.003	0.0000	0.0000	0.0000
Log pseudo-likelihood	–35.45	–253.29		–19.81	–81.45	–75.28	–699.53

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%.

Table 6: Results for the impact of labour regulation on export intensity

Independent variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	–0.032	–0.072	0.166***	3.351***	–0.315	–2.085	0.074
	(–0.41)	(–1.04)	(14.98)	(3.47)	(–1.51)	(–0.39)	(1.61)
Foreign	–3.764	7.065***	5.665***	21.683**	2.990*	0.595	9.402***
	(–0.97)	(3.83)	(8.54)	(2.09)	(1.77)	(0.22)	(5.73)
Innovate	1.741	3.773***		–1.573	–0.489	–0.784
	(0.43)	(2.72)		(–0.16)	(–0.43)	(–0.42)
Age	–2.554	0.714	0.289**	–16.777**	0.659	0.222	0.008
	(–1.20)	(1.09)	(2.26)	(–2.27)	(1.00)	(0.18)	(0.02)
Sales	4.459***	1.945***	0.482***	7.994***	1.002***	3.210***	1.211***
	(3.86)	(7.07)	(9.15)	(2.75)	(3.68)	(6.11)	(8.27)
Location	–3.734	–3.902***	0.566	–9.185	–1.444	–4.460*	–2.492***
	(–0.74)	(–3.36)	(1.53)	(–0.96)	(–1.26)	(–1.90)	(–3.67)
Country dummy							6.101***
							(6.91)
Constant	–49.550***	–27.548***	–8.224***	–59.151	–17.358***	–52.867***	–18.339***
	(–3.14)	(–6.53)	(–9.69)	(–1.26)	(3.53)	(–5.45)	(–8.43)
Observations	112	780	3 157	51	271	307	3 986
R-squared	0.13	0.18	0.14	0.46	0.08	0.13	0.14
F()	2.61	28.56	102.53	14.08	5.08	8.91	31.52
P-value	0.021	0.0000	0.000	0.000	0.0001	0.0000	0.000

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%.

Table 7: Results for the impact of labour regulation on employment (including Export as an independent variable)

Independent variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	0.006***	0.005***	0.036*	–0.044	0.038***	–0.298	0.007***
	(4.01)	(3.04)	(1.95)	(–1.58)	(3.27)	(–1.28)	(3.42)
Foreign	0.093	0.012	0.238	–0.334	0.231	0.171	0.345***
	(0.48)	(0.10)	(1.39)	(–1.28)	(1.37)	(1.42)	(4.81)
Innovate	0.137	0.352***		–0.375	0.035	0.194**
	(0.63)	(4.12)		(–1.37)	(0.38)	(2.24)
Age	0.306**	0.080	0.161***	–0.224	0.138*	0.260***	0.134***
	(2.15)	(1.39)	(4.02)	(–1.25)	(1.94)	(3.43)	(6.01)
Sales	0.331***	0.356***	0.326***	0.363***	0.368***	0.338***	0.286***
	(6.27)	(15.27)	(30.45)	(4.02)	(14.66)	(13.06)	(35.80)
Location	0.001	0.154**	0.032	–0.606	0.060	0.019	–0.013
	(0.01)	(1.98)	(0.72)	(–1.67)	(0.56)	(0.17)	(–0.35)
Export	0.509**	0.632	0.288**	1.390	0.406**	0.341**	0.804***
	(2.08)	(6.24)	(2.09)	(4.75)	(2.34)	(2.37)	(10.08)
Country dummy^a							0.313***
							(6.97)
Constant	–2.452***	–3.236***	–2.940***	–0.651	–4.226***	–4.166***	–2.324***
	(–3.20)	(–9.14)	(–15.81)	(–0.49)	(–10.58)	(–8.84)	(–17.91)
Observations	90	578	1 643	51	246	280	3 985
R-squared	0.50	0.62	0.52	0.70	0.67	0.61	0.55
F()	35.57	148.31	192.71	15.90	85.06	62.43	458.37
P-value	0.000	0.000	0.0000	0.0000	0.0000	0.0000	0.000

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%.^aKenya is the reference country.

Table 8: Results for the impact of labour regulation on investment (including Export as an independent variable)

Independent variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	0.010***	–0.007	0.025	0.035	–6.340	–0.614	0.001
	(4.50)	(–1.28)	(0.88)	(0.52)	(–0.86)	(–0.45)	(0.59)
Foreign	0.415	0.436	0.261	–1.302	9.400	0.915	–0.092
	(0.84)	(1.61)	(0.75)	(–1.68)	(1.55)	(1.29)	(–0.62)
Innovate	–0.492	0.547***		0.633	–4.430	0.363
	(–0.96)	(2.62)		(1.24)	(–1.06)	(0.72)
Age	0.066	0.027	0.275**	–0.252	2.080	0.270	–0.079
	(0.15)	(0.27)	(2.07)	(–0.95)	(0.69)	(0.60)	(–1.39)
Sales	0.413***	0.809***	0.773***	1.072***	3.700***	0.794***	0.770***
	(2.91)	(17.28)	(23.27)	(5.23)	(3.78)	(5.22)	(39.23)
Location	0.053	–0.247	0.174	1.213**	–9.700**	–0.681	0.404***
	(0.07)	(–1.53)	(0.58)	(2.28)	(–2.31)	(–1.09)	(4.66)
Export	0.540	–0.229	0.231	–0.374	–5.780	0.174**	0.232*
	(0.98)	(–1.10)	(0.55)	(–0.41)	(–0.97)	(2.05)	(1.69)
Country dummy							–0.382***
							(–3.50)
Constant	5.793***	–0.138	0.578	–3.629	–6.060***	–0.146***	1.569***
	(2.86)	(–0.19)	(1.04)	(–1.23)	(–3.43)	(–5.26)	(5.05)
Observations	90	435	1 643	42	247	279	2 125
R-squared	0.50	0.70	0.48	0.60	0.11	0.24	0.57
F()	35.57	155.48	107.99	7.28	4.12	12.54	345.28
P-value	0.0000	0.0000	0.0000	0.000	0.104	0.000	0.000

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%. Export is a dummy variable equal to 1 if firm directly exports some of its products/services. Export Intensity is the percentage of sales gained from exports. Foreign is a dummy variable equal to 1 if more than 10% of the firm is owned by foreign individuals or entities. Innovate is a dummy variable equal to 1 if firm introduced a new product into the market or significantly improved a product/service in the last three years. Age is a firm's age and is calculated by subtracting the year the firm started operations from the survey year. Location is a dummy variable equal to 1 if the firm is located in the capital city. Obstacle measures the extent to which labour regulations are an obstacle to a firm's operations; it takes values from 1 to 5 (with 1 standing for no obstacle and 5 standing for very severe obstacle). Fire is the number of workers a firm would fire if it did not have to comply with labour regulations. Hire is the number of workers a firm would hire if it did not have to comply with labour regulations. Job reallocation is the summation of Fire and Hire. Investment is the amount spent purchasing machinery, vehicles, equipment, land and building in the previous year (a year prior to the survey year). Employment is the number of employees employed by the firm.

Table 9: Results for the impact of labour regulation on employment (including interaction terms)

Independent variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	0.006***	0.005***	0.037**	–0.026	0.039***	–0.284	0.008***
	(3.36)	(2.76)	(2.01)	(–0.59)	(3.34)	(–1.20)	(5.00)
Foreign	–0.026	–0.290	0.199	–0.513	0.056	0.169	0.458***
	(0.07)	(–1.54)	(1.12)	(–1.21)	(0.22)	(0.69)	(3.86)
Innovate	0.073	0.382***		–0.152	0.023	0.206**
	(0.25)	(4.09)		(–0.48)	(0.24)	(2.23)
Age	0.291*	0.118**	0.165***	–0.280	0.152**	0.278***	0.159***
	(1.92)	(2.05)	(4.14)	(–1.33)	(2.12)	(3.65)	(6.97)
Sales	0.352***	0.393***	0.329***	0.440***	0.381***	0.350***	0.311***
	(6.19)	(17.58)	(31.49)	(4.61)	(14.73)	(13.97)	(38.58)
Location	0.031	0.178**	0.039	–0.665*	0.056	0.008	–0.006
	(0.14)	(2.22)	(0.87)	(–1.80)	(0.53)	(0.07)	(–0.15)
ForeignInnovate	0.117	0.222		–0.221	0.190	–0.068
	(1.27)	(0.90)		(–0.42)	(0.69)	(–0.25)
ForeignExport	0.339	0.552**	0.727***	1.264***	0.304	0.335	0.120
	(1.30)	(2.45)	(4.12)	(3.22)	(1.13)	(1.56)	(0.84)
Country dummy^a							0.452***
							(9.99)
Constant	–2.62***	–3.852***	–3.302***	–1.454	–4.449***	–4.410***	–2.780***
	(–3.37)	(–11.56)	(–21.23)	(–0.99)	(–10.74)	(–9.69)	(–21.97)
Observations	90	578	1 643	51	246	280	3 985
R-squared	0.49	0.60	0.52	0.63	0.66	0.61	0.52
F()	31.50	115.48	459.70	13.73	78.55	53.42	436.29
P-value	0.000	0.000	0.0000	0.0000	0.0000	0.0000	0.000

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%. ForeignInnovate is the interaction of variables Foreign and Innovate. ForeignExport is the interaction of Foreign and Exports. ^aKenya is the reference country.

Table 10: Results for the impact of labour regulation on investment

Independent variable	Country
	Botswana	Kenya	Nigeria	Swaziland	Tanzania	Uganda	All countries
Job Reallocation	0.008***	–0.008	0.026	0.019	–1.030	–0.141	0.001
	(3.37)	(–1.41)	(0.91)	(0.33)	(–1.44)	(–0.11)	(0.61)
Foreign	–0.306	0.266	0.145	–2.707*	4.600***	–0.160	–0.169
	(–0.41)	(0.49)	(0.40)	(–1.96)	(4.33)	(–1.16)	(–0.83)
Innovate	–1.124	0.460**		–0.289	–1.040	0.227
	(–1.40)	(2.05)		(–0.45)	(–0.24)	(0.44)
Age	0.122	0.016	0.275**	–0.293	2.800	0.314	–0.071
	(0.27)	(0.16)	(2.08)	(–1.17)	(0.96)	(0.73)	(–1.25)
Sales	0.436***	0.802***	0.776***	1.082***	3.580***	0.708***	0.778***
	(2.89)	(18.40)	(23.64)	(6.37)	(3.86)	(5.02)	(41.53)
Location	0.204	–0.251	0.192	0.855	–1.080***	–0.623	0.400***
	(0.29)	(–1.55)	(0.65)	(1.49)	(–2.65)	(–1.03)	(4.55)
Foreign × Innovate	1.158	0.436		2.197*	–4.090***	0.114
	(1.15)	(0.84)		(1.98)	(–3.62**)	(0.74)
Foreign × Export	–0.273	–0.190	1.640***	0.060	–2.420	0.592***	0.250
	(–0.45)	(–0.40)	(4.64)	(0.05)	(2.38)	(4.86)	(0.92)
Country Dummy							–0.336***
							(–3.28)
Constant	5.756***	–0.017	0.534	–3.214	–6.340***	–0.129***	1.424***
	(2.78)	(–0.03)	(0.98)	(–1.27)	(–3.81)	(–5.06)	(4.84)
Observations	90	435	1 640	42	247	279	2 125
R-squared	0.40	0.70	0.48	0.66	0.17	0.28	0.52
F()	13.60	138.12	259.11	7.73	6.00	14.47	339.12

Notes: t-statistics are in parentheses. *Significance at 10%, **significance at 5%, and ***significance at 1%.

Table A1: Variable description

Variable	Description
Export	Dummy variable: 1 if firm directly exports some of its products/services, 0 otherwise.
Export Intensity	The percentage of sales gained from exports
Foreign	Dummy variable: 1 if more than 10% of the firm is owned by foreign individuals or entities, 0 otherwise.
Innovate	Dummy variable: 1 if firm introduced a new product into the market or significantly improved a product/service in the last three years.
Age	This is a firm's age and is calculated by subtracting the year the firm started operations from the survey year.
Location	Dummy variable: 1 if the firm is located in the capital city, 0 otherwise.
Obstacle	This variable measures the extent to which labour regulations are to a firm's operations. It takes values from 1 to 5 (with 1 standing for no obstacle and 5 standing for very severe obstacle).
Job Reallocation	Fire + hire
Fire	Number of workers firms would fire if it did not have to comply with labour regulations.
Hire	Number of workers firms would hire if it did not have to comply with labour regulations.
Investment	Amount spent purchasing machinery, vehicles, equipment, land and building in the previous year (a year prior to the survey year).
Employment	The number of employees employed by the firm.