Research Papers

Recent studies have shown that both importers and exporters perform better than firms that serve only domestic markets. Using a detailed plant level dataset from 40 developing countries, this paper shows that there are persistent differences in firm evolution when they are grouped according to their trade orientation as: two-way traders (both importing and exporting), only importers, only exporters, and non-traders.

Trade liberalization policies undertaken between 1950 and 2006 led to an almost 30 fold growth in the volume of international trade. However this increase has not been homogeneous across countries.

A number of studies show that relative to male owned businesses, female owned businesses are smaller in size. However, these studies are restricted to the developed countries. We find similar results for firms in the unregistered sector of developing countries of Burkina Faso, Cameroon, Cape Verde, Ivory Coast, Madagascar and Mauritius.

Many studies have shown that firm growth decreases monotonically with size and age. In this study, the authors investigate employment growth of firms in Turkey with an emphasis on small and medium size enterprises. In Turkey, small and medium size enterprises account for almost 77 percent of employment and play a crucial role in the economy.

A large number of studies have shown that contribution of exporters to economic growth and development is much higher than non-exporting firms. This evidence has lead governments to improve their trade policies in order to increase foreign exposure of firms. However, improvements in trade policies can only be fully effective when they are complemented with other regulatory reforms that improve the investment climate for firms.

We present new data on effective corporate income tax rates in 85 countries in 2004 from a survey of all taxes imposed on “the same” standardized mid-size domestic firm. In this cross-section, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity.

Many recent models have been developed to fit basic facts on establishment and industry evolution. While these models yield a simple interpretation of the basic features of the data, they are too stylized to confront the micro-level data in a more formal quantitative analysis. In this paper, I develop a model in which establishments grow by innovating new products.

We use a sample of 147 countries to investigate the link between democracy and reforms. Democracy may be conducive to reform, because politicians have the incentive to embrace growth-enhancing reforms to win elections. On the other hand, authoritarian regimes do not have to worry as much about public opinion and may undertake reforms that are painful in the short run but bring future prosperity.

Differences between opportunity and necessity firms within the informal sector have long been debated. This paper revisits this debate using a new dataset of informal firms in three African countries. Focusing on average productivity of labor, a measure of firm efficiency, we find that it is much higher for opportunity compared with necessity firms.

Differences between opportunity and necessity firms within the informal sector have long been debated. This paper revisits this debate using a new dataset of informal firms in three African countries. Focusing on average productivity of labor, a measure of firm efficiency, we find that it is much higher for opportunity compared with necessity firms.

The authors use a sample of 133 countries to investigate the link between the abundance of natural resources and micro-economic reforms. Previous studies suggest that natural resource abundance gives rise to governments that are less accountable to the public and states that are oligarchic, and that it leads to the erosion of social capital.

Using a new dataset on informal or unregistered firms in Ivory Coast, Madagascar and Mauritius, this paper identifies the type of firms or entrepreneurs that experience greater obstacles to registering. We find important differences between necessity and opportunity entrepreneurs.

It shows that there are large regional differences in returns to factory investment, implying poor spatial capital mobility within India, which calls for financial markets reform.

We survey the research on the effect of employment laws in developing countries, using papers published since 2004. The survey is further supported by cross-country correlation analyses. Both exercises show that developing countries with rigid employment laws tend to have larger informal sectors and higher unemployment, especially among young workers.

The authors analyze lawsuits involving publicly-appointed lawyers in a labor court in Mexico to study how a rigid law is enforced. They show that, even after a judge has awarded something to a worker alleging unjust dismissal, the award goes uncollected 56 percent of the time.

The paper provides an alternative way of testing for the theory of legal origins, one based on firm’s perception of how helpful the government is for doing business. We argue that our approach based on firm perceptions offers a number of advantages over existing studies.

There have been large increases in R&D spending after patent law reforms in India, suggesting that intellectual property rights matter to innovation in developing countries. India, along with several other developing countries, signed the Trade Related Aspects of Intellectual Property (TRIPs) Agreement in 1994, and became obligated to amend its domestic intellectual property rights laws within ten years.

This paper studies the effects of labor-regulation reform using data for 10,396 firms from 14 Latin American countries. Firms are asked both how many permanent workers they would have hired and how many they would have terminated if labor regulations were made more flexible. I find that making labor regulations more flexible would lead to an average net increase of 2.08 percent in total employment.

We use nationally representative survey data from Mexico to compare households with savings accounts in formal financial institutions to their neighbors who do not have such accounts. The survey was conducted in 2005 and contains information on nearly 5000 households.

There is a large literature that finds that common law countries perform better than civil law countries in various aspects of the institutional environment.

India's Golden Quadrilateral Program aimed at improving the quality and width of existing highways connecting the four largest cities in India. This affected the quality of highways available to firms in cities that lie along the routes of the four upgraded highways, while leaving the quality of highways available to firms in other cities unaffected.

A large literature shows that the legal tradition of a country is highly correlated with various dimensions of institutional quality. Broadly, studies show that English common law countries perform better than the French civil law countries with respect to the regulatory burden on firms, efficiency of courts and contract enforcement, corruption, and overall governance.

This paper takes another look at the extent of business regulation in civil law versus common law countries. In contrast to existing studies that find a heavier role of government regulation in the civil law countries, we show that this holds only for a subset of civil and common law countries that have well developed political institutions but not otherwise.

A recent survey of 1,948 retail stores in India conducted by the World Bank’s Enterprise Surveys shows that 19 percent of the stores use computers for their business. In some states like Kerala, computer usage is as high as 40 percent. Using this data we find labor regulation as an important determinant of computer usage.

Between 1991 and 2001, the number of adult non-workers per household showed a secular decline in most parts of India. The decline was as sharp as 18.6 percent in the state of Haryana, 12.7 percent in Kerala and 12.6 percent in Punjab. The paper estimates the likely effect of these changes on market competition using micro data on retail stores in India.

The paper analyzes the effect of product market competition on the average productivity of labor in India’s retail sector. The authors use a new dataset of 1,948 retail stores located in 41 cities of India compiled by the World Bank’s Enterprise surveys. According to the survey, 62% of the stores do not face any significant competition.

The authors estimate the effect on business start-ups of a program that significantly speeds up firm registration procedures. The program was implemented in Mexico in different municipalities at different dates.

Firm-level data from a cross-section of 57 countries is used to study how financial development affects innovation in small firms. The author finds that relative to large firms in the same industry, R\&D spending by small firms is more likely and sizable in countries at higher levels of financial development.

In this paper we estimate the elasticity of substitution of US imports using detailed trade data over the 1990-2003 period. We use a two-stage least squares framework in order to identify the elasticity parameter of interest. Our elasticity estimates for aggregate imports are in line with those of other recent studies.

A new dataset of 1,948 retail stores in India compiled by the World Bank's Enterprise Surveys shows that 27 percent of the stores report labor regulations as a problem for their business. Using these data we analyze the effect of labor regulation on employment at the store level.

Using a newly assembled data set on procedures filed in Mexican labor tribunals, the authors of this paper study the determinants of final awards to workers. On average, workers recover less than 30 percent of their claim. The strongest result is that workers receive higher percentages of their claims in settlements than in trial judgments.

Using a census of all workers in private establishments in the formal sector in Mexico to track workers and establishments over time, this paper presents the first Mexican worker and job flow statistics. The data allow for comparing these flows across time, space, and worker characteristics.

Despite the rising volume of remittances flowing to developing countries, their impact on the development of banking services in recipient countries has been largely unexplored. We examine this topic using county-level data for Mexico on the fraction of households that receive remittances and measures of both banking breadth (e.g., branches or accounts per capita) and depth (e.g., deposits or credit to GDP).

The authors measure the extent to which firms in developing countries are the target of bribes. Using new firm-level survey data from 33 African and Latin American countries, the analysis shows that perceptions adjust slowly to firms’ experience with corrupt officials and hence are an imperfect proxy for the true incidence of graft.

Creditor-friendly laws are generally associated with more credit to the private sector and deeper financial markets. But laws mean little if they are not upheld in the courts. The authors hypothesize that the effectiveness of creditor rights is strongly linked to the efficiency of contract enforcement. This hypothesis is tested using firm-level data on 27 European countries in 2002 and 2005.

The authors tested the hypothesis that enterprises may forgo formal finance in lieu of informal credit by choice. They do so to avoid the additional regulatory scrutiny and harassment that engaging with the formal financial sector invites. The hypothesis is tested using enterprise level data on 3564 enterprises in 29 countries.

This paper investigates who is most affected by informal competition and how regulation and enforcement affect the extent and nature of this competition. Using newly-collected enterprise data for 6,466 manufacturing formal firms across 14 countries in Latin America, the authors show that formal firms affected by head-to-head competition with informal firms largely resemble them.

We compare results from a pilot study on entrepreneurship in China and Russia. Compared to non-entrepreneurs, Russian and Chinese entrepreneurs have more entrepreneurs in their family and among childhood friends, value work more relative to leisure and have higher wealth ambitions.

Using objective measures of business regulations in 135 countries, we establish that countries with better regulations grow faster. Improving from the worst quartile of business regulations o the best implies a 2.3 percentage point increase in annual growth.