IDEAS home Printed from https://ideas.repec.org/a/ucp/ecdecc/y2005v54i1p1-31.html
   My bibliography  Save this article

Investment Climate and Firm Performance in Developing Economies

Author

Listed:
  • Dollar, David
  • Hallward-Driemeier, Mary
  • Mengistae, Taye

Abstract

Drawing on recently completed firm-level surveys in Bangladesh, China, India, and Pakistan, this article investigates the relationship between the investment climate and firm performance. These standardized surveys of large, random samples of firms in common sectors reveal that objective measures of the investment climate vary significantly across countries and across locations within these countries. We focus primarily on measures of the time or monetary cost of different bottlenecks (e.g., days to clear goods through customs, days to get a telephone line, and sales lost to power outages). For many of these costs, the obstacles are lower in China than in Bangladesh or India, which in turn are higher than in Pakistan. There is also systematic variation across cities within countries. We estimate a production function for garment firms and show that total factor productivity is systematically related to the investment climate indicators. Factor returns (wages for a given quality of human capital and rate of profit) are also higher where investment climate is better. These higher returns then have dynamic effects: accumulation and growth at the firm level are higher where the investment climate is better.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:ecdecc:y:2005:v:54:i:1:p:1-31
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/431262
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Robert E. Hall & Charles I. Jones, 1999. "Why do Some Countries Produce So Much More Output Per Worker than Others?," The Quarterly Journal of Economics, Oxford University Press, vol. 114(1), pages 83-116.
    2. John Luke Gallup & Jeffrey D. Sachs & Andrew Mellinger, 1999. "Geography and Economic Development," CID Working Papers 01A, Center for International Development at Harvard University.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:ecdecc:y:2005:v:54:i:1:p:1-31. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: http://www.journals.uchicago.edu/EDCC/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.