Identifying Binding Constraints to Growth: Does Firm Size Matter?

January 14, 2015

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Format: Chicago

Mauricio Vargas. Identifying Binding Constraints to Growth: Does Firm Size Matter?, (USA: International Monetary Fund, 2015) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

As emphasized by Hausmann, Rodrik and Velasco, the policy challenge of boosting growth requires prioritization and identifying what are the most binding constraints. This paper draws on firm-level data from the World Bank Enterprise Survey, which suggests that the obstacles for the functioning of firms is related to firm size. Recognizing the potential endogeneity and simultaneity between firms' constraints and firm size, we implement an Ordered-Probit model with a potential categorical endogenous regressor to estimate, for the case of Bolivia, the conditional probability of facing obstacles given the firm size category, while controlling for other factors. The results confirm the importance of allowing for the roles of firm size in identifying constraints and suggest priorities for policies to remove constraints to economic performance.

Subject: Commodities, Corruption, Crime, Electricity, Labor, National accounts, Revenue administration, Tax administration core functions, Transportation

Keywords: Binding constraint, Bolivia, Constraint level, Constraints relationship, Corruption, Electricity, Firm size, Firm's constraint, Firms’ Constraints, IV-Oprobit, Large firm, Representative firm, Tax administration core functions, Transportation, WP

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/003
Stock No:

WPIEA2015003
ISBN:

9781498358088
ISSN:

1018-5941

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