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Productivity and the investment climate : what matters most?

Author

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  • Bastos,Fabiano
  • Nasir, John

Abstract

The authors explore the links between the investment climate and firm-level productivity and attempt to identify which dimensions of the investment climate matter most for productivity. Their analysis is based on data collected in a recent investment climate survey of garment and food processing firms in five countries in Eastern Europe and Central Asia. The authors use the first principal components of a series of indicators to summarize broad aspects of the investment climate and identify those most important in determining productivity. Their results indicate that competitive pressure is the most critical factor in the investment climate, accounting for more variation in firm-level productivity than infrastructure provision or issues related to government rent seeking and bureaucratic burden. This suggests that to improve productivity, increase output, and reduce poverty, policymakers should focus reform efforts on removing barriers to entry and creating open, highly competitive markets.

Suggested Citation

  • Bastos,Fabiano & Nasir, John, 2004. "Productivity and the investment climate : what matters most?," Policy Research Working Paper Series 3335, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3335
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    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. 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.
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    Citations

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    Cited by:

    1. Kinda, Tidiane & Plane, Patrick & Veganzones-Varoudakis, Marie-Ange, 2009. "Firms'productive performance and the investment climate in developing economies : an application to MENA manufacturing," Policy Research Working Paper Series 4869, The World Bank.
    2. World Bank, 2005. "The Cost of Doing Business in Africa : Evidence from the World Bank’s Investment Climate Data," World Bank Other Operational Studies 8769, The World Bank.
    3. Sundaram-Stukel, Reka & Deininger, Klaus W. & Jin, Songqing, 2006. "Fostering growth of the rural non-farm sector in Africa: The Case of Tanzania," 2006 Annual meeting, July 23-26, Long Beach, CA 21165, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Lall, Somik V. & Mengistae, Taye, 2005. "The impact of business environment and economic geography on plant-level productivity : an analysis of Indian industry," Policy Research Working Paper Series 3664, The World Bank.
    5. Barseghyan, Levon & DiCecio, Riccardo, 2011. "Entry costs, industry structure, and cross-country income and TFP differences," Journal of Economic Theory, Elsevier, vol. 146(5), pages 1828-1851, September.
    6. Eric J. Bartelsman & John Haltiwanger & Stefano Scarpetta, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," Tinbergen Institute Discussion Papers 04-114/3, Tinbergen Institute.
    7. Clarke, George R. G., 2005. "Do government policies that promote competition encourage or discourage new product and process development in low and middle-income countries?," Policy Research Working Paper Series 3471, The World Bank.
    8. Eifert, Benn & Gelb, Alan & Ramachandran, Vijaya, 2008. "The Cost of Doing Business in Africa: Evidence from Enterprise Survey Data," World Development, Elsevier, vol. 36(9), pages 1531-1546, September.
    9. Ghosh, Saibal, 2009. "Do productivity and ownership really matter for growth? Firm-level evidence," Economic Modelling, Elsevier, vol. 26(6), pages 1403-1413, November.
    10. Osvaldo Nina, 2007. "¿Qué hace la Diferencia para el Logro de una Mayor Productividad Laboral? Caso de los Países de Bajos Ingresos en América Latina," Development Research Working Paper Series 01/2007, Institute for Advanced Development Studies.
    11. Şeker, Murat & Yang, Judy S., 2014. "Bribery solicitations and firm performance in the Latin America and Caribbean region," Journal of Comparative Economics, Elsevier, vol. 42(1), pages 246-264.
    12. Levon Barseghyan, 2008. "Entry costs and cross-country differences in productivity and output," Journal of Economic Growth, Springer, vol. 13(2), pages 145-167, June.
    13. Osvaldo Nina & Pablo von Vacano, 2006. "Insumos para la construcción de una Visión Productiva de País," Development Research Working Paper Series 15/2006, Institute for Advanced Development Studies.

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