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Investment climate assessment based on demean Olley and Pakes decompositions: methodology and application to Turkey's investment climate survey

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  • Pena, Jorge
  • Orte, Manuel De
  • Guasch, J. Luis
  • Escribano, Álvaro

Abstract

Most empirical studies show strong detrimental evidence that regulatory, and administrative, barriers to entry have on productivity and on firm growth. In this paper we evaluate and measure the total factor productivity (TFP) impacts of having; low quality physical infrastructures (electricity, telecommunications, transport, customs, etc.) and bad social infrastructures (rules of law, informality, corruption, etc.). We suggest evaluating the impact on average productivity (TFP) and on the allocative efficiency of production among firms based on several versions of the Olley and Pakes (O&P) decompositions. We evaluate the advantages and disadvantages of each the O&P decomposition in terms of their IC explanatory power. Once we have measured those IC impacts, we compare them with other sources of empirical information obtained from firm’s perceptions on main bottlenecks for firm growth and from doing business reports of the World Bank (2007). For the econometric analysis, we use firm level data bases from Turkey’s manufacturing sector based on Investment Climate surveys (ICs) done by the World Bank. These ICs are done in many other developing countries and therefore we propose to make crosscountry comparisons based on a new demean concept of TFP that also reduces the heterogeneity if using several robust productivity measures within each country.

Suggested Citation

  • Pena, Jorge & Orte, Manuel De & Guasch, J. Luis & Escribano, Álvaro, 2008. "Investment climate assessment based on demean Olley and Pakes decompositions: methodology and application to Turkey's investment climate survey," UC3M Working papers. Economics we082012, Universidad Carlos III de Madrid. Departamento de Economía.
  • Handle: RePEc:cte:werepe:we082012
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    Cited by:

    1. Ibarrarán, Pablo & Maffioli, Alessandro & Stucchi, Rodolfo, 2009. "SME Policy and Firms’ Productivity in Latin America," IZA Discussion Papers 4486, Institute of Labor Economics (IZA).
    2. Paul Terna Gbahabo & Oluseye Samuel Ajuwon, 2017. "Effects of Project Cost Overruns and Schedule Delays in Sub-Saharan Africa," European Journal of Interdisciplinary Studies Articles, European Center for Science Education and Research, vol. 7, EJIS Janu.
    3. Pena, Jorge & Escribano, Álvaro, 2009. "Empirical econometric evaluation of alternative methods of dealing with missing values in Investment Climate surveys," UC3M Working papers. Economics we098750, Universidad Carlos III de Madrid. Departamento de Economía.
    4. World Bank Group, . "West Bank and Gaza Investment Climate Assessment : Fragmentation and Uncertainty," World Bank Other Operational Studies, The World Bank, number 20268.
    5. Clarke, George, 2012. "Manufacturing firms in Africa: Some stylized facts about wages and productivity," MPRA Paper 36122, University Library of Munich, Germany.
    6. World Bank Group, . "Lao PDR Investment Climate Assessment 2014 : Policy Uncertainty in the Midst of a Natural Resources Boom," World Bank Other Operational Studies, The World Bank, number 21506.

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    More about this item

    Keywords

    Total factor productivity;

    JEL classification:

    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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