Author: Philippe Alby, Emmanuelle Auriol, Pierre Nguimkeu.

Formal sector in Africa is small and dominated by entrepreneurs of foreign origin. Social arrangements prevailing in Africa explain this equilibrium. Local entrepreneurs in the formal sector have the social obligation to provide a job and to redistribute their wealth to their relatives. Consequently, such firms are less productive than their foreign counterparts, which discourages formal entrepreneurship. Exploiting surveys from 7,514 manufacturing firms in 31 Sub-Saharan African countries, the empirical analysis supports the theory. The proportion of missing African entrepreneurs is structurally estimated to be between 6% and 12% of the workforce of the formal sector.