A Framework for Cross-Country Comparisons of Public Infrastructure Constraints on Firm Growth
How should a policy-maker prioritize interventions to improve the public infrastructure with which firms operate and how large are the benefits from doing so likely to be? To address these questions we use survey data on the obstacles arising from poor quality public inputs that managers face in running their firms. Our conceptual framework centres on the public input character of physical infrastructure and institutions, and uses an O-ring production function to model the impact of poor quality infrastructure on output. Using survey data from over 72,000 firms in 95 countries, we verify the consistency of the within- and cross-country variation in reported constraints with predictions of the model. We use the framework to construct estimates of the impact on output and productivity of improvements in the quality of public inputs and how these differ between rich and poor countries. We show how a policy-maker can use the country-level data and the benchmarks estimated from the cross-country data to prioritize public infrastructure investment in their country. Our results indicate that priorities vary widely among countries and suggest a degree of caution about donor policies tying development assistance to generic improvements in the business environment. The results also suggest that the benefits arising directly from such improvements are likely to be modest relative to the scale of impact implied by aggregate-level studies of the role of institutions in economic development.
|Date of creation:||Jan 2010|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hallward-Driemeier, Mary & Aterido, Reyes, 2009. "Comparing Apples with....Apples : how to make (more) sense of subjective rankings of constraints to business," Policy Research Working Paper Series 5054, The World Bank.
- Pierre Cahuc & Andrei Shleifer & Philippe Aghion & Yann Algan, 2009.
"Regulation and Distrust,"
Sciences Po publications
14648, Sciences Po.
- Aghion, Philippe & Algan, Yann & Cahuc, Pierre & Shleifer, Andrei, 2010. "Regulation and Distrust," Scholarly Articles 12490649, Harvard University Department of Economics.
- Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2009. "Regulation and Distrust," Working Papers hal-00396268, HAL.
- Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2009. "Regulation and Distrust," NBER Working Papers 14648, National Bureau of Economic Research, Inc.
- Angus S. Deaton, 2009.
"Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development,"
NBER Working Papers
14690, National Bureau of Economic Research, Inc.
- Angus Deaton, 2009. "Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development," Working Papers 1128, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Health and Wellbeing..
- Angus Deaton, 2009. "Instruments of development: Randomization in the tropics, and the search for the elusive keys to economic development," Working Papers 1122, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
- Carlin, Wendy & Schaffer, Mark E & Seabright, Paul, 2006.
"Where Are the Real Bottlenecks? Evidence from 20,000 Firms in 60 Countries About the Shadow Costs of Constraints to Firm Performance,"
CEPR Discussion Papers
5719, C.E.P.R. Discussion Papers.
- Carlin, Wendy & Schaffer, Mark E & Seabright, Paul, 2007. "Where Are the Real Bottlenecks? Evidence from 20,000 Firms in 60 Countries about the Shadow Costs of Constraints to Firm Performance," IZA Discussion Papers 3059, Institute for the Study of Labor (IZA).
- 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.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:7662. 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: ()
If references are entirely missing, you can add them using this form.