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Investment Climate Effects on Alternative Firm-Level Productivity Measures

Alvaro Escribano (), J. Luis Guasch and Jorge Pena

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Developing countries are increasingly concerned about improving country competitiveness and productivity. Investment Climate surveys (ICs) at the firm level, are becoming the standard way for the World Bank to identify key obstacles to country competitiveness. This paper develops a general to specific econometric methodology, based on firm level observable fixed effects that generate robust investment climate effects (elasticities) on total factor productivity (TFP). By robust IC elasticities on TFP we mean elasticity estimates with equal signs and of similar magnitudes for several competing TFP measures. We apply this econometric methodology to the IC survey of Costa Rica showing how robust the investment climate effects are for several measures of TFP when conditioning on relevant plant-level information that is usually unobserved. For the economic evaluation we estimate the marginal effects of each IC variable on TFP as well as their IC impacts on average TFP obtaining important economic differences. These IC estimates are obtained from five blocks of IC variables, (i) infrastructure, (ii) red tape, corruption and crime, (iii) finance and corporate governance, (iv) quality, innovation and labor skills and (v) other control variables, could be used as benchmarks to assess cross-country IC assessments of TFP.

Keywords: Total; Factor; Productivity; Investment; Climate; Observable; Fixed; Effects; Robust; Estimates; Input-Output; Elasticities; Impact; Evaluation; On; Average; Tfp; Demeaned; Tfp (search for similar items in EconPapers)
JEL-codes: C18 C23 C51 F14 L11 L25 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-eff and nep-env
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