Robust investment climate effects on alternative firm-level productivity measures

Developing countries are increasingly concerned about improving country competitiveness and productivity, as they face the increasing pressures of globalization and attempt to improve economic growth and reduce poverty. Among such countries, Investment Climate surveys (ICs) at the firm level, have become the standard way for the World Bank to identify key obstacles to country competitiveness, in order to prioritize policy reforms for enhancing competitiveness. Given the surveys objectives and the nature and limitations of the data collected, this paper discusses the advantages and disadvantages of using different total factor productivity (TFP) measures. The main objective is to develop a methodology to generate robust investment climate impacts (elasticities) on TFP under alternative measures. The paper applies it to the data collected for ICs in four developing countries: Costa Rica, Guatemala, Honduras and Nicaragua. Observations on logarithms of the production function variables are pooled across three countries (Guatemala, Honduras and Nicaragua). Endogeneity of the production function inputs and of the investment climate variables is addressed by using observable firm level information, a variant of the control function approach, considering IC variables as proxy and also by aggregating certain investment climate variables by industry and region. It is shown that by using this methodology it is possible to get robust IC “elasticities” on TFP for more than ten different TFP measures. The robust IC elasticity estimates for the five countries show how relevant the investment climate variables are to explain the average productivity of each country. IC variables in several categories (red tape, corruption and crime, infrastructure and, quality and innovation) account for over 30 percent of average productivity. The policy implications are clear: investment climate matters and the relative impact of the various investment climate variables helps indentifying where reform efforts should be directed in each country. It is argued that this robust methodology can be used as a benchmark to assess cross-country productivity effects in other IC surveys. This is important since similar firm-level IC surveys on several sectors (manufacturing, services, etc.) are now available at the World Bank for more than 65 developing countries.Total factor productivity measures, Investment climate, Observable fixed effects, Robust investment climate elasticities, Input-output elasticities

Essays on Corruption

Corruption is a global concern and requires attention because of its detrimental effects on economic growth and development. This dissertation includes three different essays that identify some of the instruments that can be used to fight corruption. The first essay investigates whether women\u27s presence in economic and political arenas can have a significant impact on corruption. It finds evidence that while women\u27s presence in parliament does reduce corruption other measures of female participation in economic activities are shown to have no effect. The second essay shows that internet and Facebook have an adverse effect on corruption. Finally, in a theoretical analysis the concluding essay finds that an asymmetric liability policy may not be effective in reducing bribery. A modification in the asymmetric liability policy is suggested and is shown to be more effective

The Geography of Trade in Goods and Asset Holdings

Gravity models have been widely used to describe bilateral trade in goods. Recently, Portes and Rey [1999] applied this framework to cross border equity flows and found that distance, which proxies information asymmetries in financial markets, is a surprisingly very large barrier to cross-border asset trade. We adopt here a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings. We jointly study trade in goods and banking assets in a simultaneous gravity equations framework using different instruments for both endogenous variables. To instrument trade in goods, we choose geographical variables (excluding distance) and data on bilateral transport costs. For asset holdings, we use legal similarities between countries and data on the international taxation of withheld capital. We find that the strong correlation between bilateral trade in goods and asset holdings is not simply due to distance: bilateral trade in goods generates bilateral asset holdings and vice versa. Those effects are of first order magnitude: a 10% increase in trade generates a 6 to 7% increase of asset holdings, and a 10% increase in banking claims induces a 2 to 3% increase in trade. Finally, we investigate the question of the remaining impact of distance. We find out that the impact of distance on trade in goods is only slightly reduced, while for asset holdings, a large part of the effect of distance is going through trade.Gravity Models; International Finance; International Trade; Simultaneous Equations

Determinants Of Barries To Quality Of Direct Foreign Investments Evidences From South & East Asian Economies

The objective of this paper is to examine whether FDI inflows in South & East Asian economies posses any barriers which are deterring to attract FDI of their actual potential? If so, what are those various set of barriers? These questions are addressed in this study using cross section time series data for 17 South and East Asian economies from 1996 to 2005.http://deepblue.lib.umich.edu/bitstream/2027.42/64376/1/wp910.pd

Investment climate and firm’s economic performance: econometric methodology and application to Turkey's investment climate survey

Government policies and behavior exert a strong influence on the investment climate through their impact on costs, risks and barriers to competition. Key factors affecting the investment climate through their impact on costs are: corruption, taxes, the regulatory burden and extent of red tape in general, factor markets (labor, intermediate materials and capital), the quality of infrastructure, technological and innovation support, and the availability and cost of finance. While the investment climate surveys are quite useful in identifying major issues and bottlenecks as perceived by firms, the data collected is also meant to provide the basic information for an econometric assessment of the impact or contribution of the investment climate (IC) variables on productivity. We believe that improving the investment climate (IC) is a key policy instrument to promote economic growth and to mitigate the institutional, legal, economic and social factors that are constraining the convergence of per capita income and labor productivity of Turkey relative to more developed countries. For that, we need to identify the main investment climate variables that affect economic performance measures like total factor productivity, employment, wages, exports and foreign direct investment and this is the main goal of this paper. In turn, that quantified impact is used in the advocacy for, and design of, investment-climate reforms

Environmental, Social and Governance (ESG) performance and sovereign bond spreads : an empirical analysis of OECD countries

What are the determinants of borrowing cost in international capital markets? Apart from macroeconomic fundamentals, are there any qualitative factors that might capture sovereign bond spreads? In this paper we consider to what extent Environmental, social and governance (ESG) performance can affect sovereign bond spreads. First, countries with good ESG performance tend to have less default risk and thus lower bond spreads. Moreover, the economic impact is stronger in the long-run, suggesting that ESG performance is a long-lasting phenomenon. Second, we examine the financial impact of separate ESG dimensions, and find that the environmental dimension appears to have no financial impact whereas governance weighs more than social factors. Third, we examine cross-countries differences and show that ESG performance has a more significant and stronger impact in the Eurozone than elsewhere in OECD countries. Fourth, we include evidence from the global financial crisis and find stronger influence of country sustainability performance during crisis period.Publisher PD

inequality, poverty, and well-being

Thesis(Doctoral) -- KDI School: Ph.D in Development Policy, 2022This dissertation presents the empirical results of a series of studies on the development issues such as income inequality, poverty, and employee’s well-being. The objective of this study is to examine empirical evidence of how technological progress affect income inequality in advanced countries as well as poverty reduction in developing countries, and further to explore the effect of work hour reduction policy on employee well-being. This will enable us to expand our understanding on the effects of technological progress on socio-economic outcomes as well as the impact of labor market policy on worker’s satisfaction. This thesis consists of three chapters under the broad banner of three essays on development issues: inequality, poverty, and well-being. The first essay, Innovation and Top Income Inequality: Evidence from OECD Countries, aims to explore the effect of innovation on top income inequality in OECD countries over the period of 1980-2017. Innovation is proxied by the number of patent application. Top income inequality is expressed by top 0.1%, 0.5%, 1%, 10% income shares. Sample countries are 34 high-income countries as most innovations occur in these countries. Using cross-country panel and 2SLS estimations to deal with the endogeneity, I found that innovation has positive and significant impact on top income shares in rich countries. These results are also robust using alternative innovation variables such as patent grant and patent citation data. Based on this finding, I propose three kinds of policy options to reduce rising top income inequality: prevent tax loopholes used by the richest and strengthen tax progressivity for the top riches, lastly enhance educational reforms to improve moral values and thus reduce corruptions. The second essay, Financial Innovation, Financial Inclusion, and Poverty: Evidence from Developing Countries, explores the links between financial innovation and poverty in developing countries. For this, a panel was set up for 103 developing countries over the period of 2004-2018. To address endogeneity, OLS with fixed effects and instrument variable strategy are used. As external instruments, latitude of capital city and legal origins are used for European ex-colonies. The results show that financial innovation measured by Financial Inclusion Index shows negative and significant effects on poverty. This is robust when using alternative Financial Development Index created by IMF. Thus, financial innovation is a useful tool for poverty reduction in developing countries. This implies that financial innovation enhances financial inclusion through easier access to finance, which brings about growth and reduces poverty. This encourages developing countries to make efforts on boosting financial innovation to address poverty issue. The third essay, The Effect of Work Hour Reduction on Employee Satisfaction: The Case of Working Hour Reduction Policy in Korea, investigates the effect of standard 40-hour workweek policy on workers’ subjective well-being in Korea. The essential part of the policy was to reduce legal work hour per week from 44 to 40 hours, aiming to improve workers’ quality of lives. The policy was implemented in time order by industry and firm size from 2004 through 2011. This policy setting provides us a good opportunity to explore the causal impact of the policy by using DID (difference-in-difference) analysis. I use Korea Labor and Income Panel Study (KLIPS) data to estimate the effect of the policy on life and job satisfaction by applying DID estimation method. I found that the policy has significant effect on life satisfaction with leisure and family income while negative effects on job satisfaction overall. This result is also robust when the dependent variables are converted into binary variables.- Chapter 1: Innovation and Top Income Inequality: Evidence from OECD Countries, 1980-2017 - Chapter 2: Financial Innovation, Financial Inclusion, and Poverty: Evidence from 103 developing countries - Chapter 3: The Effect of Work Hour Reduction Policy on Employee Satisfactions: The Case of Work Hour Reduction in KoreadoctoralpublishedSooyoung HWAN

Essays On The Economics Of Corruption, Institutions, And Management Practices

My thesis focuses on the economics of corruption, institutions, and management practices. The impact of corruption on economic performance is a key issue in development economics, central to the evaluation and design of public policies. Chapter one introduces the theoretical framework of this thesis. It highlights the embeddedness of corruption at every institutional level and its interdependence with other institutions. The framework identifies petty and grand corruption and corruption at different levels, at the industry, region and country level, to examine the interrelation between corruption, other institutions, and management decisions on the resource allocation of firms, and the impact of public sector reforms in reducing corruption. Chapter two and three examine the two channels through which corruption affects private sector development, the external environment under which firms operate, and their internal environment. Chapter two analyses the relationship between corruption measured at different levels and firm performance. I find that at the individual firm level, corruption could be, in some cases, profit-maximizing. However, at the regional and country level, I find that the aggregate costs of corruption remain negative and significant for all firms. Chapter three examines the impact of corruption on the firm’s management practices. I investigate the impact of regional corruption on the management quality of firms within the manufacturing sector in Central and Eastern Europe. I find that firms in more contract-dependent industries located in more corrupt regions tend to have lower management quality. Chapter four by contrast looks at factors that help eliminate corruption at the macro-level, and specifically e-government. I find that the development of online services by the state tends to decrease corruption, and that progress in e-government can facilitate several business processes. Chapter five, concludes. I review the main contributions of the thesis and discuss future research

THE ROLE OF ICT IN EDUCATION: AN EFFICIENCY ANALYSIS

Nell’ambito dell’educazione, l’utilizzo delle tecnologie dell’informazione e della comunicazione (TCI) si è notevolmente intensificato negli ultimi decenni grazie agli investimenti effettuati. Il concetto di TCI è molto ampio. In questo lavoro di tesi, TCI non si riferisce solo alle infrastrutture fisiche (ad esempio radio, telefono, video, televisione, computer), ma include anche l’uso e l’intensità di utilizzo (ad esempio l’impiego giornaliero, settimanale, ecc.), la qualità e l’ubicazione dell’infrastruttura (ad esempio, a scuola oppure a casa), il motivo del suo utilizzo (ad esempio, per svago o per motivi di studio) e la spesa relativa alle TIC. Questa dissertazione discute il ruolo delle TIC nell’istruzione concentrandosi sull’analisi dell’efficienza. La tesi comprende quattro lavori ripartiti in diversi capitoli. Il Capitolo II propone una sistematica literature review sull’argomento. Il Capitolo III esegue un’analisi transnazionale dell’efficienza dell’istruzione a livello scolastico in sei Paesi del sud-est asiatico, ossia in Brunei Darussalam, in Malesia, in Indonesia, nelle Filippine, a Singapore ed in Tailandia. L’analisi viene effettuata mediate l’approccio della stochastic frontier analysis (SFA) che consente di considerare l'eteroschedasticità. Da questo studio risulta che Singapore è comparativamente il Paese con la migliore performance. Nell’analisi condotta, le variabili TIC, ovvero (1) il rapporto tra computer a scuola e (2) il numero totale di studenti ed il rapporto tra computer connessi a Internet, sono assunte essere determinanti dell’inefficienza ed entrano come input nella funzione di produzione (istruzione). Dall’analisi condotta, emerge che il primo rapporto non influenza in modo significativo gli esiti scolastici mentre il secondo ha un significativo impatto. Come determinanti dell’inefficienza, il primo rapporto influisce sull’inefficienza della scuola in nelle aree di matematica e scienze, mentre il secondo non ha alcuna influenza. Il Capitolo IV utilizza l'approccio DEA (non-parametric data envelopment analysis) del modello di super-efficienza che consente alle scuole efficienti di avere punteggi di efficienza superiori a uno (nell’approccio DEA tradizionale, il punteggio di efficienza è limitato da zero a uno). Per studiare i fattori che potenzialmente influenzano l’efficienza, questo studio include anche una seconda analisi basata sull’approccio bootstrapped quantile regression. I risultati suggeriscono una serie di implicazioni politiche per le scuole del sud-est asiatico, indicando diverse linee d’azione per le scuole sia con livelli di efficienza più alti sia per quelle con efficienza minore. Il Capitolo V estende l'analisi condotta nel Capitolo III sia dal punto di vista metodologico che empirico. L’analisi, basata sull’approccio SFA, non include solo le infrastrutture TCI nel modello, ma aggiunge anche l’uso delle TCI (compreso l’indice del tempo trascorso dagli studenti nell’uso delle TCI a scuola, fuori dalla scuola per scopi di intrattenimento e a casa per compiti scolastici). Ciò viene fatto utilizzando il “modello di frontiera stocastica a quattro componenti” in cui le TCI sono modellate sia come input che come determinanti di inefficienza variabile nel tempo. Inoltre, questo modello viene testato utilizzando un set di dati di 24 Paesi OCSE. I risultati mostrano che tutte e tre le variabili che appartengono all’uso delle TIC influenzano i risultati sul livello di istruzione degli studenti, mentre come determinanti di inefficienza, queste variabili hanno solo un effetto marginale. Questo studio dovrebbe quindi fornire una visione più olistica del ruolo delle TIC nell’efficienza dei processi educativi.In education sector, the application of information and communication technology (ICT) has increased substantially over the last decades as many countries have been investing their resources in ICT for educational purposes. The ICT is a broad concept. In this dissertation, ICT does not only refer to physical infrastructure (e.g., radio, telephone, video, television, computer), but it also includes the use and the intensity of use (e.g., every day, one a week, twice a week), the quality and location of the infrastructure (e.g., at school, at home), the reason for using it (e.g., for entertainment or for study purposes), and the expenditure related to the ICT. This dissertation then discusses the role of ICT in education focusing on the efficiency analysis. It comprises four studies starting with a systematic literature review presented in Chapter II, which offers a clear overview of what has and has not been done in the literature towards this particular topic. Chapter III performs cross-country analysis of efficiency of education at school level in six countries in South-East Asia (i.e., Brunei Darussalam, Malaysia, Indonesia, the Philippines, Singapore, and Thailand). The stochastic frontier analysis (SFA) allowing for heteroscedasticity is used. The result reveals that Singapore has the (relatively) best performance among other countries. The ICT infrastructure variables, i.e., the ratio of computers at school to the total number of students and the ratio of computers connected to the internet, are modeled as inputs in the (education) production function and determinants of inefficiency. The first ratio is found to be not significant influencing education outcomes while the second one does influence. As determinants of inefficiency, the first ratio affects school’s inefficiency in terms of mathematics and science, while the second one has no influence. Relying the finding of Chapter III that there are many higher efficiency level schools, Chapter IV uses the non-parametric data envelopment analysis (DEA) approach of the super-efficiency model which has the ability to differentiate among the higher efficiency level schools. This model allows the efficient schools to have efficiency scores of more than one (in the traditional DEA approach, the efficiency score is bounded from zero to one). To investigate factors that potentially influence efficiency, this study performs the “second-stage” analysis by using bootstrapped quantile regression. The results suggest a number of policy implications for South-East Asian schools, indicating different courses of action for schools with higher and lower efficiency levels. Chapter V extends the analysis conducted in Chapter III both from methodological and empirical point of views. The analysis, based on the SFA approach, not only includes the ICT infrastructure in the model, but it also adds the ICT use (including the index of time spent by students in using ICT at school, outside school for entertainment purposes, and at home for school-related tasks). This is done by using the “four-component stochastic frontier model” where ICT is modeled both as inputs and determinants of time-varying inefficiency. In addition, this model is tested using a dataset of 24 OECD countries. Results show that all three variables belong to ICT use influence education outcomes, while as the determinants of time-varying inefficiency, these variables have only marginal effect on inefficiency. This study is then expected to provide a more holistic view of the role of ICT in the efficiency of education measurement as the previous studies only addressed the ICT infrastructure