Pakistan's Investment Climate : Laying the Foundation for Renewed Growth, Volume 3. Background Paper on Econometric Methods (original) (raw)
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Robust investment climate effects on alternative firm-level productivity measures
2012
Key words: Total factor productivity effects, robust investment climate JEL Codes: C23, C18, L25, L11 1 This paper is an updated and revised version of based on a selection of the recent results obtained in the background working papers written for the investment climate assessments (ICA) of the World Bank on 42 develo Madagascar, Malawi, and Peru. the TFP results that we present here are maintained in all these countries. Heisnam Singh and Rodolfo Stucchi for their excellent research assistance and to D. Ackerberg, Levinsohn for the suggestions g suggestions of Paulo Correa, Total factor productivity measures, investment climate, observable fixed investment climate elasticities, input-output elasticities. L25, L11, F14, C51 This paper is an updated and revised version of Escribano and Guasch (2004, 2005, 2008) based on a selection of the recent results obtained in the background working papers written for the investment climate assessments (ICA) of the World Bank on 42 developing countries. The list of countries includes Eritrea, Ethiopia, and Peru. t here are maintained in all these countries. We are indebted to Jorge Pena, Heisnam Singh and Rodolfo Stucchi for their excellent research assistance and to D. Ackerberg, the suggestions given on the previous versions of this paper. We have also benefited from the suggestions of Paulo Correa, Madrid jguasch@worldbank.org observable fixed This paper is an updated and revised version of Escribano and Guasch (2004, 2005, 2008) based on a selection of the recent results obtained in the background working papers written for the investment climate assessments The list of countries includes Eritrea, Ethiopia,
Background paper on econometric methods
2009
In this paper we describe the econometric methodology applied in searching for empirical regularities on the investment climate (IC) effects and on the economic performance of Pakistan firms. We use firm level data coming from the investment climate surveys (ICSs) of Pakistanmanufactures and services-for 2007 and 2002. For identification of the main IC effects on economic performance we follow the robust productivity methodology developed in Escribano and Guasch (2005 and 2008) and Escribano et al (2008b). Once we have robust IC elasticities and semielasticities on productivity and on other economic performance measres, we follow Escribano, et al, (2008a) and Escribano, Guasch and Pena, (2008) for the evaluation of the impact of the IC variables in terms of the Olley and Pakes (1996) decomposition of aggregate productivity and in terms of the sample means of alternative economic performance measures (employment, wages, probability of exporting and probability of receiving FDI). This econometric methodology has been widely used in the ICA of many other countries, allowing us to do cross country demeaned productivity comparisons. Furthermore, it also allow us to estimate robust IC productivity effects controlling for endogeneity and observable fixed effects while having certain simultaneity among covariates, missing observations and measurement errors.
2008
Government policies and behavior exert a strong influence on the investment climate through their impact on costs, risks and barriers to competition. Key factors affecting the investment climate through their impact on costs are: corruption, taxes, the regulatory burden and extent of red tape in general, factor markets (labor, intermediate materials and capital), the quality of infrastructure, technological and innovation support, and the availability and cost of finance. While the investment climate surveys are quite useful in identifying major issues and bottlenecks as perceived by firms, the data collected is also meant to provide the basic information for an econometric assessment of the impact or contribution of the investment climate (IC) variables on productivity. We believe that improving the investment climate (IC) is a key policy instrument to promote economic growth and to mitigate the institutional, legal, economic and social factors that are constraining the convergence of per capita income and labor productivity of Turkey relative to more developed countries. For that, we need to identify the main investment climate variables that affect economic performance measures like total factor productivity, employment, wages, exports and foreign direct investment and this is the main goal of this paper. In turn, that quantified impact is used in the advocacy for, and design of, investment-climate reforms.
Drawing on the World Bank Investment Climate Assessment (ICA) enterprises' surveys, this paper reveals for a large number of developing countries and eight manufacturing industries, that investment climate (IC) matters for firms' productive performance. This is true (depending on the industry) for the quality of various infrastructure, the experience and education level of the labor force, the cost and access to financing, as well as different dimensions of the government-business relation. The empirical analysis also illustrates that Middle East and North Africa (MENA) low industrial productivity can be linked to the deficiencies of the investment climate in the region. The exception is Morocco, whose firms' investment climate and technical efficiency rank close to the ones of the most efficient economies of the empirical sample. The paper reveals as well that industries more exposed to international competition show a higher sensitivity to IC limitations. This is also ...
Documentos De Trabajo Economic Series, 2008
Most empirical studies show strong detrimental evidence that regulatory, and administrative, barriers to entry have on productivity and on firm growth. In this paper we evaluate and measure the total factor productivity (TFP) impacts of having; low quality physical infrastructures (electricity, telecommunications, transport, customs, etc.) and bad social infrastructures (rules of law, informality, corruption, etc.). We suggest evaluating the impact on average productivity (TFP) and on the allocative efficiency of production among firms based on several versions of the Olley and Pakes (O&P) decompositions. We evaluate the advantages and disadvantages of each the O&P decomposition in terms of their IC explanatory power. Once we have measured those IC impacts, we compare them with other sources of empirical information obtained from firm's perceptions on main bottlenecks for firm growth and from doing business reports of the World Bank (2007). For the econometric analysis, we use firm level data bases from Turkey's manufacturing sector based on Investment Climate surveys (ICs) done by the World Bank. These ICs are done in many other developing countries and therefore we propose to make crosscountry comparisons based on a new demean concept of TFP that also reduces the heterogeneity if using several robust productivity measures within each country.
The Developing Economies, 2011
Les commentaires et analyses développés n'engagent que leurs auteurs qui restent seuls responsables des erreurs et insuffisances. CERDI, Etudes et Documents, E 2011.26 3 Abstract Firm productive performances in five Middle East and North African (MENA) economies and eight manufacturing industries are compared to those in 17 other developing countries. Although the broad picture hides some heterogeneity, enterprises in MENA often performed inadequately compared to MENA status of middle-income economies, with the exception of Morocco and, to some extent, Saudi Arabia. Firm competitiveness is a more constant constraint, with a unit labor cost higher than in most competitor countries, as well as investment climate (IC) deficiencies. The empirical analysis also points out how IC matters for firm productivity through the quality of infrastructure, the experience and education of the labor force, the cost and access to financing, and different dimensions of the government-business relationship. These findings bear important policy implications by showing which dimensions of the IC, in which industry, could help manufacturing in MENA to be more competitive in the globalization context.
2016
Most empirical studies show strong detrimental evidence that regulatory, and administrative, barriers to entry have on productivity and on firm growth. In this paper we evaluate and measure the total factor productivity (TFP) impacts of having; low quality physical infrastructures (electricity, telecommunications, transport, customs, etc.) and bad social infrastructures (rules of law, informality, corruption, etc.). We suggest evaluating the impact on average productivity (TFP) and on the allocative efficiency of production among firms based on several versions of the Olley and Pakes (O&P) decompositions. We evaluate the advantages and disadvantages of each the O&P decomposition in terms of their IC explanatory power. Once we have measured those IC impacts, we compare them with other sources of empirical information obtained from firm’s perceptions on main bottlenecks for firm growth and from doing business reports of the World Bank (2007). For the econometric analysis, we use firm ...
2016
This paper investigates the role of labor productivity in attracting foreign direct investment in Pakistan for the period of 1980 to 2015. The aim of this research study is to examine the contagion effects of productivity variations on FDI flows in Pakistan using SVAR modeling. The results of impulse response function confirm that productivity is a long-term phenomenon in attracting foreign direct investment. It is also found that FDI flows into Pakistan react to consumption changes in the long run. The results of variance decomposition suggest that the productivity of Pakistan is the most dominant factor in predicting forecast error variance of foreign direct investment in Pakistan. Pakistani productivity shocks are stronger as compare to Chinese productivity shocks in explaining variation in FDI. These findings lead to accept the hypothesis that an increase in productivity of Pakistan attracts FDI. The real effective exchange rate behaves negatively to FDI flows in the long run, r...