Enforcing Competition and Firm Productivity: Evidence from 1,800 Peruvian Municipalities (original) (raw)
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Firm-level productivity in Latin America and the Caribbean
Research in Economics, 2020
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Increasing formality and productivity of Bolivian firms
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This paper uses firm level surveys from Ecuador, Guatemala, Honduras and Nicaragua to estimate the determinants of labor productivity. This study started out with the hypothesis that the adverse external business conditions that firms in poor Latin American countries face, may be an important explication of the generally low levels of productivity. However, the empirical results, based on the survey of more than 1300 businesses, do not confirm this hypothesis. Compared to all the variables that are under the firms control, such as capital intensity, energy use, and worker skills, the external business environment (macroeconomic instability and labor regulations) has very little impact on productivity.
Research Papers in Economics , 2020
Innovation is one of the main determinants to stimulate productivity. However, incentives to innovate may be affected by the level of competition. In particular, in developing countries, where informality is highly prevalent, formal firms have to face both types of competition: formal and informal. Previous studies have acknowledged a negative impact from competition (schumpeterian effect) but also, several recent studies have shown that competition could spur innovation (escape-competition effect). Given the importance of informal competition in developing countries, as Peru, where almost three out of four firms are informal and the intensity of investment in R&D+i activities is pretty low, this study aims to evaluate the impact of formal and informal competition, at the industrial level, on the whole innovation process and, expressly, on productivity for Peru. By using a CDM model, this study analyses how the intensity of formal and informal competition affects every stage of the innovation process. The CDM model makes possible to study four interrelated stages of the innovation process: i) the firms' choice to engage with innovation, ii) the amount of resources invested in R&D+i activities, iii) the effects of R&D+i investments on innovation output, and iv) the impacts of innovation outcome on firms' productivity. The model is estimated using firm-level data collected by the Peruvian National Innovation Survey 2018 and the National Business Survey 2018. Our main findings indicate that competition, both formal and informal, affects negatively the decision to engage in innovation. However, the relationship changes throughout the remaining stages of the innovation process. Whereas the informal competition affects negatively the whole innovation process (engage in innovation, intensity of R&D+I activities spending, innovation output and firms' productivity) satisfying the Schumpeterian theory; formal competition seems to affect positively the intensity of R&D+i activities spending and also firms' productivity, which can be explained as an escape-competition effect within the formal firms. In conclusion, meanwhile it is found that informal competition affects negatively the whole innovation process, formal competition could, instead, encourage formal firms' willingness to invest more in R&D+i activities, increasing their productivity.
Competition and Firm Productivity: Evidence From Firm-Level Data
IMF Working Papers, 2010
The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper presents empirical evidence on the impact of competition on firm productivity. Using firm-level observations from the World Bank Enterprise Survey database, we find a positive and robust causal relationship between our proxies for competition and our measures of productivity. We also find that countries that implemented product-market reforms had a more pronounced increase in competition, and correspondingly, in productivity: the contribution to productivity growth due to competition spurred by product-market reforms is around 12-15 percent. JEL Classification Numbers: O11, O17, O40, O43, O47