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Productivity and Resource Misallocation: Empirical Findings from Firms in the Middle East and North Africa (MENA) Region and Turkey

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  • Eleftherios Giovanis

    (İzmir Bakırçay University, Faculty of Economics and Administrative Sciences, Department of International Trade and Management, İzmir, Turkey)

  • Öznur Özdamar

    (İzmir Bakırçay University, Faculty of Economics and Administrative Sciences, Economics, İzmir, Turkey)

Abstract

State-Business relations (SBRs) are reflected in business and investment climate indicators and may take the form of formal, regular, and informal interactions. The creation of an institutional environment in which the state provides high-quality public goods, such as infrastructure, political stability, elimination of corruption, and effective public administration, is important because it can improve productivity and lead to higher rates of growth. Resource reallocation from low to high productivity firms can generate large aggregate productivity gains with further potential benefits to economic growth. This study examines the relationship between productivity and resource misallocation in a sample of countries in the Middle East and North Africa (MENA) region, and Turkey. The analysis relies on data from the World Bank Enterprise Surveys over 2008-2016 of firms in Egypt, Turkey, and Yemen. In the analysis, we control various firm characteristics. Furthermore, we explore major state-business relations (SBRs) and their association to resource misallocation. The results are mixed, wherein in Egypt and Turkey, female ownership and international quality certification are positively associated with productivity and allocation efficiency. Moreover, obstacles in SBRs present a negative and significant correlation with the firms’ performance and productivity, increasing dispersions in the resource allocation, output, and capital. We find that corruption, political instability, electricity supply, and high tax rates are the most critical obstacles in SBRs.

Suggested Citation

  • Eleftherios Giovanis & Öznur Özdamar, 2022. "Productivity and Resource Misallocation: Empirical Findings from Firms in the Middle East and North Africa (MENA) Region and Turkey," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 9(1), pages 1-37, January.
    • Handle: RePEc:ist:iujepr:v:9:y:2022:i:1:p:1-37
    DOI: 10.26650/JEPR1021400
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    More about this item

    Keywords

    Firm-Level data; Firm characteristic; Productivity; Resource misallocation; State-Business relations JEL Classification : D24; L25; O43;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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