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Identifying Binding Constraints to Growth: Does Firm Size Matter?

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  • Mr. Mauricio Vargas

Abstract

As emphasized by Hausmann, Rodrik and Velasco, the policy challenge of boosting growth requires prioritization and identifying what are the most binding constraints. This paper draws on firm-level data from the World Bank Enterprise Survey, which suggests that the obstacles for the functioning of firms is related to firm size. Recognizing the potential endogeneity and simultaneity between firms' constraints and firm size, we implement an Ordered-Probit model with a potential categorical endogenous regressor to estimate, for the case of Bolivia, the conditional probability of facing obstacles given the firm size category, while controlling for other factors. The results confirm the importance of allowing for the roles of firm size in identifying constraints and suggest priorities for policies to remove constraints to economic performance.

Suggested Citation

  • Mr. Mauricio Vargas, 2015. "Identifying Binding Constraints to Growth: Does Firm Size Matter?," IMF Working Papers 2015/003, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2015/003
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    Cited by:

    1. Villarroel-Böhrt, Sergio G., 2019. "Diagnóstico de crecimiento en Bolivia: Una Aplicación a Través de Redes Limitantes," Other publications TiSEM 97b99c6d-b5c7-4646-a415-b, Tilburg University, School of Economics and Management.

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