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Good and Bad Institutions: Is the Debate Over? Cross-Country Firm-Level Evidence from the Textile Industry

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  • Bhaumik, Sumon K.

    ()
    (University of Sheffield)

  • Dimova, Ralitza

    ()
    (University of Manchester)

Abstract

Using firm-level data from nine developing countries we demonstrate that (a) certain institutions like restrictive labour market regulations that are considered to be bad for economic growth might be beneficial for production efficiency, whereas (b) good business environment which is considered to be beneficial for economic growth might have an adverse impact on production efficiency. We argue that our results suggest that the debate about the implications of institutional quality is far from being over, and classification of institutions into "good" and "bad" might be premature.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 5471.

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Length: 24 pages
Date of creation: Jan 2011
Date of revision:
Publication status: published in: Cambridge Journal of Economics, 38(1): 109-126, 2014, [Online First]
Handle: RePEc:iza:izadps:dp5471

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Keywords: production efficiency; stochastic frontier model; institutional quality;

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References

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  1. Dollar, David & Hallward-Driemeier, Mary & Mengistae, Taye, 2005. "Investment Climate and Firm Performance in Developing Economies," Economic Development and Cultural Change, University of Chicago Press, vol. 54(1), pages 1-31, October.
  2. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3643, C.E.P.R. Discussion Papers.
  3. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(4), pages 760-81, August.
  4. Shubik, Martin, 1975. "The General Equilibrium Model Is Incomplete and Not Adequate for the Reconciliation of Micro and Macroeconomic Theory," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 28(3), pages 545-73.
  5. Campos, Nauro F. & Nugent, Jeffrey B., 1999. "Development Performance and the Institutions of Governance: Evidence from East Asia and Latin America," World Development, Elsevier, Elsevier, vol. 27(3), pages 439-452, March.
  6. Djankov, Simeon & Murrell, Peter, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3319, C.E.P.R. Discussion Papers.
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Cited by:
  1. Sumon Bhaumik & Ralitza Dimova, 2012. "Does human capital endowment of FDI recipient countries really matter? Evidence from cross-country firm level data," William Davidson Institute Working Papers Series wp1030, William Davidson Institute at the University of Michigan.
  2. Bhaumik, Sumon K. & Dimova, Ralitza & Kumbhakar, Subal C. & Sun, Kai, 2014. "More Is Better! What Can Firm-Specific Estimates of the Impact of Institutional Quality on Performance Tell Us?," IZA Discussion Papers 7886, Institute for the Study of Labor (IZA).

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