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What influences firms' perceptions?

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Author Info

  • Kaplan, David S.
  • Pathania, Vikram

Abstract

Perceptions-based indicators are sometimes used to measure the quality of the business environment. For instance, firms are asked about the major constraints on business operations and expansion. Little is known, however, about what shapes their responses. In this paper, using perceptions-based indicators from 38 countries (84 country-year pairs) from the World Bank Enterprise Surveys, we argue that firm responses are critically influenced by macroeconomic conditions. Paradoxically, we find that perceptions worsen during periods of high GDP growth. We also examine other indicators from the Enterprise Surveys that are objective measures of constraints, and find mixed evidence on how business constraints vary with the business cycle. Finally, we find that firms that introduce new product lines, which are likely those with the most interactions with regulatory agencies, have particularly bad perceptions of the business environment. We conclude that changes in firms' perceptions over time may not reflect changes in the business environment.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 38 (2010)
Issue (Month): 4 (December)
Pages: 419-431

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Handle: RePEc:eee:jcecon:v:38:y:2010:i:4:p:419-431

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Web page: http://www.elsevier.com/locate/inca/622864

Related research

Keywords: Measurement of institutions Firm perceptions Business climate;

References

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  1. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
  2. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
  3. Edward L. Glaeser & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "Do Institutions Cause Growth?," Journal of Economic Growth, Springer, vol. 9(3), pages 271-303, 09.
  4. Benjamin A. Olken, 2005. "Monitoring Corruption: Evidence from a Field Experiment in Indonesia," NBER Working Papers 11753, National Bureau of Economic Research, Inc.
  5. William D. Nordhaus, 1998. "Quality Change in Price Indexes," Journal of Economic Perspectives, American Economic Association, vol. 12(1), pages 59-68, Winter.
  6. Sendhil Mullainathan & Marianne Bertrand, 2001. "Do People Mean What They Say? Implications for Subjective Survey Data," American Economic Review, American Economic Association, vol. 91(2), pages 67-72, May.
  7. Dabla-Norris, Era & Gradstein, Mark & Inchauste, Gabriela, 2008. "What causes firms to hide output? The determinants of informality," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 1-27, February.
  8. Daniel Kahneman & Alan B. Krueger, 2006. "Developments in the Measurement of Subjective Well-Being," Journal of Economic Perspectives, American Economic Association, vol. 20(1), pages 3-24, Winter.
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Citations

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Cited by:
  1. Lu, Jiangyong & Liu, Xiaohui & Filatotchev, Igor & Wright, Mike, 2014. "The impact of domestic diversification and top management teams on the international diversification of Chinese firms," International Business Review, Elsevier, vol. 23(2), pages 455-467.
  2. Şeker, Murat & Yang, Judy S., 2014. "Bribery solicitations and firm performance in the Latin America and Caribbean region," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 246-264.
  3. Seker, Murat & Yang, Judy S., 2012. "How bribery distorts firm growth : differences by firm attributes," Policy Research Working Paper Series 6046, The World Bank.
  4. Jahedi, Salar & Méndez, Fabio, 2014. "On the advantages and disadvantages of subjective measures," Journal of Economic Behavior & Organization, Elsevier, vol. 98(C), pages 97-114.
  5. Van-Ha Le & Jakob de Haan & Erik Dietzenbacher, 2013. "Do Higher Government Wages Reduce Corruption? Evidence Based on a Novel Dataset," CESifo Working Paper Series 4254, CESifo Group Munich.

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