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Investment climate and firm’s economic performance: econometric methodology and application to Turkey's investment climate survey

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  • Alvaro Escribano

    ()

  • J. Luis Guasch
  • Manuel De Orte

    ()

  • Jorge Pena

    ()

Abstract

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.

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Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we082113.

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Date of creation: Jun 2008
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Handle: RePEc:cte:werepe:we082113

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Keywords: Investment climate; firm level determinants of TFP; Employment; Wages; Exports and FDI; Mean contributions of investment climate;

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  1. Loayza, Norman V. & Oviedo, Ana Maria & Serven, Luis, 2005. "Regulation and macroeconomic performance," Policy Research Working Paper Series 3469, The World Bank.
  2. Edward C. Prescott, 1997. "Needed: a theory of total factor productivity," Staff Report, Federal Reserve Bank of Minneapolis 242, Federal Reserve Bank of Minneapolis.
  3. Dani Rodrik & Arvind Subramanian, 2005. "From "Hindu Growth" to Productivity Surge: The Mystery of the Indian Growth Transition," IMF Staff Papers, Palgrave Macmillan, vol. 52(2), pages 193-228, September.
  4. Diego Restuccia & Richard Rogerson, 2007. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," NBER Working Papers 13018, National Bureau of Economic Research, Inc.
  5. Brown, G. Marvin, 1998. "Managing Change," Journal of Food Distribution Research, Food Distribution Research Society, Food Distribution Research Society, vol. 29(1), February.
  6. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  7. Dani Rodrik & Arvind Subramanian, 2004. "From "Hindu Growth" to Productivity Surge," IMF Working Papers 04/77, International Monetary Fund.
  8. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 102(2), pages 298-321, April.
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Cited by:
  1. Alvaro Escribano & Jorge Pena, 2009. "Empirical econometric evaluation of alternative methods of dealing with missing values in Investment Climate surveys," Economics Working Papers we098750, Universidad Carlos III, Departamento de Economía.
  2. World Bank, 2012. "Bangladesh - Towards Accelerated, Inclusive and Sustainable Growth : Opportunities and Challenges, Volume 2. Main Report," World Bank Other Operational Studies 12121, The World Bank.

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