Testing the Effects of ISO Certification on Firm Productivity Differences Across Global Sub-Regions: Is There a Productivity Gap in Sub-Saharan Africa?

Abstract

In this paper, we tested the statistical association between labor productivity of manufacturing firms and the rapid adoption of the International Standards Organization (ISO) certifications across global sub-regions. The objective of the research was two-fold: 1) to test whether innovation introduced by the adoption of ISO certification creates significant labor productivity premiums and whether certification is associated with a convergence to a world productivity frontier and, 2) to test the popularly held argument that sub-Sahara Africa lags the rest of the world in labor productivity. Using firm-level data from the World Bank Enterprise Surveys for 65 countries and applying panel data econometric estimation techniques, we tested for differences in mean labor productivity among manufacturing firms. The results show an economically and statistically significant association between standards certification and firm labor productivity. Comparisons of average labor productivity across global sub-regions failed to support the productivity convergence hypothesis and, importantly, contrary to expectations, Sub-Saharan Africa firms recorded better average productivity than those from East and Central Europe, Middle East and North Africa, and East Asia and Pacific regions. The claims of a productivity gap in sub-Sahara Africa found no support in our data.