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Binding Constraints: Does Firm Size Matter?

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  • Vargas, Jose P Mauricio

Abstract

Using Bolivian firm level data from the World Bank 2010 Enterprise Survey, we attempt to find evidence to support the idea that distinct formal firms (according to their size) have a distinct likelihood of facing obstacles. We propose that a potential endogeneity between firms' constraints and firm size should be considered. After calculating estimations from an IV-ordered probit with an ordinal endogenous regressor, the results suggest that the firm size affects the constraint level reported by firms, but not for all kind of obstacles. `Corruption', `Political Instability', and `Crime, Theft and Disorder' are obstacles which affect all firms; `Electricity' and `Transportation' are binding constraints to medium and large firms; and `Access to Financing' is a binding constraint to small firms. These findings are important because they can be directly extrapolated to public policy that is focused on the performance of firms.

Suggested Citation

  • Vargas, Jose P Mauricio, 2012. "Binding Constraints: Does Firm Size Matter?," MPRA Paper 41286, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41286
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    References listed on IDEAS

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    Cited by:

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    2. Bateman, Milford, 2013. "The age of microfinance: Destroying Latin American economies from the bottom up," Working Papers 39, Austrian Foundation for Development Research (ÖFSE).
    3. Michael J. Peel, 2014. "Addressing unobserved endogeneity bias in accounting studies: control and sensitivity methods by variable type," Accounting and Business Research, Taylor & Francis Journals, vol. 44(5), pages 545-571, October.

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    More about this item

    Keywords

    Firm; Size; Constraints; IV-oprobit;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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