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Political Stability, Firm Characteristics and Performance: Evidence From 6,083 Private Firms in the Middle East

Listed author(s):
  • Amr Hosny

    ()

    (International Monetary Fund)

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    Using firm-level data from an EBRD/EIB/WB joint survey covering more than 6,000 private firms in 8 countries in the Middle East and North Africa, this paper (i) examines the relationship between firm characteristics and their perception of the effect of political instability on their operations, and (ii) tests whether political instability has had a negative effect on firm performance. Using ordered and binary probit/logit models, we find that (i) export-oriented and larger-sized firms are less likely to report political instability as a sever obstacle to their operations. Using OLS and an endogenous treatment linear regression models, we find that the perception of political instability is negatively associated with firm performance, and after correcting for endogeneity it can even have a negative causal effect on firms’ sales and employment growth, all else held constant. Results are largely robust to different specifications and econometric methods.

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    Paper provided by Economic Research Forum in its series Working Papers with number 1137.

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    Length: 24 pages
    Date of creation: 09 2017
    Date of revision: 09 2003
    Publication status: Published by The Economic Research Forum (ERF)
    Handle: RePEc:erg:wpaper:1137
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    1. Lixin Colin Xu, 2011. "The Effects of Business Environments on Development: Surveying New Firm-level Evidence," World Bank Research Observer, World Bank Group, vol. 26(2), pages 310-340, August.
    2. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters,in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
    3. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, July.
    4. Desai, Raj M. & Olofsgård, Anders, 2011. "The Costs of Political Influence: Firm-Level Evidence From Developing Countries," Quarterly Journal of Political Science, now publishers, vol. 6(2), pages 137-178, September.
    5. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
    6. Ali Fakih & Pascal L. Ghazalian, 2015. "What factors influence firm perceptions of labour market constraints to growth in the MENA region?," International Journal of Manpower, Emerald Group Publishing, vol. 36(8), pages 1181-1206, November.
    7. Rina Bhattacharya & Hirut Wolde, 2012. "Business Environment Constraints On Growth In The Mena Region," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 4(01), pages 1-18.
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