Assesing the Impact of the Investment Climate on Productivity Using Firm-Level Data: Methodology and the Cases of Guatemala, Honduras, and Nicaragua

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 Assessments (ICA) have become a standard instrument for identifying key obstacles to country competitiveness and imputing their impact on productivity, in order to prioritize policy reforms for enhancing competitiveness. Given the survey objectives and the nature and limitations of the data collected, this report discusses the advantages and disadvantages of using different productivity measures based on data at the firm level. The main objective is to develop a methodology to appropriately estimate, in a robust manner, the productivity impact of the investment climate variables. To illustrate the use of this methodology, the report applies it to the data collected for ICAs in three countries: Guatemala, Honduras and Nicaragua. Observations in logarithms (logs) of the variables, and not in rates of growth, are pooled from all three countries. The econometric analysis is done with variables in logs to reduce the impact of measurement errors and allow inclusion of as many observations as possible since the “panel” data set is very unbalanced. Endogeneity of the production function inputs and of the investment climate variables is addressed by using a variant of the control function approach, based on individual firm information, and by aggregating investment climate variables by industry and region. It is shown that it is possible to get robust results for 10 different productivity measures, if one follows a consistent econometric methodology of specification and estimation. For policy analysis, the report strongly recommends using those results of investment climate variables on productivity that are robust for most of the productivity measures. Efficiency aspects of firms in each country are also analyzed. Finally, the results are decomposed to obtain country-specific impacts and establish corresponding priorities for policy reform. The actual estimates for the three countries show the level of significance of the impact of investment climate variables on productivity. Variables in several categories, red tape and infrastructure in particular, appear to account for over 30 percent of productivity. The policy implications are clear: investment climate matters enormously and the relative impact of the various investment climate variables indicates where reform efforts should be directed. Given the robustness of the results, it is argued that the econometric methodology of productivity analysis developed here ought to be used as a benchmark to assess productivity effects for other ICAs or surveys with firm-level data of similar characteristics

Deregulation and Productivity: The Case of Spanish Banks

This paper deals with measuring total factor productivity (TFP) growth of financial institutions incorporating different types of deregulatory measures. TFP growth is decomposed into external, scale, and markup (in output prices) components. The contribution of the external component is further dissected into several types of deregulation and technical change components. We include the TFP growth relationship as an additional equation in estimating the cost system. The empirical model uses panel data on Spanish banks (savings and commercial), primarily because the Spanish banking sector went through rapid deregulatory changes. We find that deregulations, in general, contributed positively to TFP growth for both savings and commercial banks. Furthermore, domestic (European) deregulations had a greater effect on TFP growth of savings (commercial) banks.Total factor productivity, markup, deregulation, and technical change.

A Random Matrix Approach to Dynamic Factors in macroeconomic data

We show how random matrix theory can be applied to develop new algorithms to extract dynamic factors from macroeconomic time series. In particular, we consider a limit where the number of random variables N and the number of consecutive time measurements T are large but the ratio N / T is fixed. In this regime the underlying random matrices are asymptotically equivalent to Free Random Variables (FRV).Application of these methods for macroeconomic indicators for Poland economy is also presented.Comment: arXiv admin note: text overlap with arXiv:physics/0512090 by other author

Cooperative Mergers and Acquisitions: The Role of Capital Constraints

Several explanations for merger activity exist for publicly traded firms, but none consider the unique aspects of cooperatives. This study develops a test for the hypothesis that cooperative consolidation occurs primarily in response to capital constraints associated with a lack of access to external equity capital. An empirical model estimates the shadow value of long-term investment capital within a multinomial logit model of transaction choice in a panel data set of the 100 largest U.S. cooperatives. The results substantially confirm the capital-constraint hypothesis. Thus, the primary implication is that internal growth may be a more viable alternative to consolidation if new forms of cooperative financing are developed.capital structure, cooperative, discrete choice, joint ventures, mergers, multinomial logit, strategic alliances, Agribusiness,

Assessing the impact of the investment climate on productivity using firm-level data : methodology and the cases of Guatemala, Honduras, and Nicaragua

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 assessments (ICA) have become a standard instrument for identifying key obstacles to country competitiveness and imputing their impact on productivity, in order to prioritize policy reforms for enhancing competitiveness. Given the survey objectives and the nature and limitations of the data collected, the authors discuss the advantages and disadvantages of using different productivity measures based on data at the firm level. Their main objective is to develop a methodology to appropriately estimate, in a robust manner, the productivity impact of the investment climate variables. To illustrate the use of this methodology, the authors apply it to the data collected for ICAs in three countries-Guatemala, Honduras, and Nicaragua. Observations in logarithms (logs) of the variables, and not in rates of growth, are pooled from all three countries. The econometric analysis is done with variables in logs to reduce the impact of measurement errors and allow inclusion of as many observations as possible since the"panel"data set is very unbalanced. The authors address the endogeneity of the production function inputs and of the investment climate variables by using a variant of the control function approach based on individual firm information, and by aggregating investment climate variables by industry and region. The authors show that it is possible to get robust results for 10 differentproductivity measures, if one follows a consistent econometric methodology of specification and estimation. For policy analysis, they recommend using those results of investment climate variables on productivity that are robust for most of the productivity measures. The also analyze efficiency aspects of firms in each country. Finally, they decompose the results to obtain country-specific impacts and establish corresponding priorities for policy reform. The actual estimates for the three countries show the level of significance of the impact of investment climate variables on productivity. Variables in several categories, red tape and infrastructure in particular, appear to account for over 30 percent of productivity. The policy implications are clear: investment climate matters enormously and the relative impact of the various investment climate variables indicates where reform efforts should be directed. Given the robustness of the results, the authors argue that the econometric methodology of productivity analysis developed here ought to be used as a benchmark to assess productivity effects for other ICAs or surveys with firm-level data of similar characteristics.

The Role of External Economies in U.S. Manufacturing

This paper develops a method for joint estimation of both the degree of internal returns to scale and the extent of external economies. We apply the method in estimating returns to scale indexes for U.S. manufacturing industries at the two-digit level. Overall, we find that only three of the twenty industry categories show any evidence of internal increasing returns: (1) Primary Metals, (2) Electrical Machinery, and (3) Paper Products. More striking, however, is the very strong evidence of the existence of external economies, where external is defined as external to a given two-digit industry and internal to the U.S.. According to our preferred estimates, if all manufacturing industries simultaneously raise their inputs by 10%, aggregate manufacturing production rises by 13%, of which about 5% is due to external economies. Thus, when an industry increases its inputs in isolation by 10%, its output rises by no more than 8%.

Software cost estimation

The paper gives an overview of the state of the art of software cost estimation (SCE). The main questions to be answered in the paper are: (1) What are the reasons for overruns of budgets and planned durations? (2) What are the prerequisites for estimating? (3) How can software development effort be estimated? (4) What can software project management expect from SCE models, how accurate are estimations which are made using these kind of models, and what are the pros and cons of cost estimation models

Post Merger Performance of Agricultural Cooperatives

Agricultural cooperatives are participating in mergers, acquisitions, strategic alliances, and joint ventures at a record pace. While post-post merger performance has been examined extensively for investor owned firms, this has not been the case for agricultural cooperatives since these firms do not have an explicit profit motive nor publicly traded stock. Results from a three-stage econometric model reveal that a major motivation for cooperatives to engage in these activities is to circumvent unique capital constraints, thus resulting in improved profitability. Furthermore, the decision to merge and financial performance are jointly endogenous, with profitability positively influenced and sales growth negatively influenced by the likelihood of merger.acquisitions, capital constraints, cooperatives, financial performance, joint ventures, mergers, probit modeling, strategic alliances, Agribusiness,

Capturing the Overall Economic Impacts of HEIs

University of Strathclyde were commissioned on behalf of the Tripartite Advisory Group (TAG) on higher education in Scotland to evaluate the current state of knowledge on the overall impact of higher education in Scotland. The Strathclyde report examines evidence from Scotland, UK and international studies to draw conclusions about the impact of HE on the Scottish economy