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What drives firm productivity growth ?

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  • Anos-Casero, Paloma
  • Udomsaph, Charles

Abstract

This paper presents new evidence on the causal links between changes in the business environment and firm productivity growth. It contributes to the literature in three important aspects. First, it constructs a unique database merging information from two large firm-level databases. The samples of both databases are merged on four criteria-country, sub-national location, firm size, and year-producing a panel of 22,004 firms in eight economies of Eastern Europe and the former Soviet Union: Bulgaria, Croatia, Czech Republic, Estonia,, Poland, Romania, Serbia, and Ukraine. Second, the paper addresses shortcomings of earlier studies, namely reverse causation, multicollinearity, and unreliable productivity estimates. Firm productivity growth is estimated drawing on corporate financial data from manufacturing firms included in the AMADEUS database. Changes in the business environment are estimated from the World Bank Enterprise Surveys conducted in 2002 and 2005. Multicollinearity problems in the full model regression are mitigated by constructing a set of six aggregate indicators of the business environment (using principal component analysis). The paper finds that, over the period 2001 to 2004, an increase of one standard deviation in infrastructure quality, financial development, governance, labor market flexibility, labor quality, and market competition raises the total factor productivity of the average firm by 9.8, 7.8, 3.2, 3.4, 5.8, and 3 percent, respectively. Lastly, the paper decomposes firm productivity growth and ranks the relative impact of changes in these six aspects of the business environment by country, by firm size, and by industry.

Suggested Citation

  • Anos-Casero, Paloma & Udomsaph, Charles, 2009. "What drives firm productivity growth ?," Policy Research Working Paper Series 4841, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4841
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    Cited by:

    1. Sanja Borkovic & Peter Tabak, 2018. "Public investment and corporate productivity in Croatia," Public Sector Economics, Institute of Public Finance, vol. 42(2), pages 171-186.
    2. Fungáčová, Zuzana & Kochanova, Anna & Weill, Laurent, 2015. "Does Money Buy Credit? Firm-Level Evidence on Bribery and Bank Debt," World Development, Elsevier, vol. 68(C), pages 308-322.
    3. Florian Morvillier, 2020. "Infrastructures and the real exchange rate," EconomiX Working Papers 2020-26, University of Paris Nanterre, EconomiX.
    4. Hanousek, Jan & Kochanova, Anna, 2015. "Bribery Environment and Firm Performance: Evidence from Central and Eastern European Countries," CEPR Discussion Papers 10499, C.E.P.R. Discussion Papers.
    5. Weshah Razzak, 2010. "An Empirical Glimpse on MSEs Four MENA Countries," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 53(1), pages 59-89.
    6. repec:zbw:bofitp:2014_004 is not listed on IDEAS
    7. Dall'Olio, Andrea & Iootty, Mariana & Kanehira, Naoto & Saliola, Federica, 2013. "Productivity growth in Europe," Policy Research Working Paper Series 6425, The World Bank.
    8. Jan Hanousek & Anastasiya Shamshur & Jan Svejnar & Jiri Tresl, 2021. "Corruption level and uncertainty, FDI and domestic investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(9), pages 1750-1774, December.
    9. Dall'Olio, Andrea & Iootty, Mariana & Kanehira, Naoto & Saliola, Federica, 2014. "Enterprise productivity: a three-speed Europe," Working Paper Series 1748, European Central Bank.
    10. Fungáčová, Zuzana & Kochanova, Anna & Weill, Laurent, 2015. "Does Money Buy Credit? Firm-Level Evidence on Bribery and Bank Debt," World Development, Elsevier, vol. 68(C), pages 308-322.
    11. Lau, Chi Keung Marco & Demir, Ender & Bilgin, Mehmet Huseyin, 2013. "Experience-based corporate corruption and stock market volatility: Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 17(C), pages 1-13.
    12. Hanousek, Jan & Kochanova, Anna, 2016. "Bribery environments and firm performance: Evidence from CEE countries," European Journal of Political Economy, Elsevier, vol. 43(C), pages 14-28.

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    E-Business; Banks&Banking Reform; Labor Policies; Governance Indicators; Economic Theory&Research;
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