Search

Total factor productivity is a key element of economic growth and an important performance metric for policy makers. This note describes the methodology for measuring firm-level total factor productivity using the World Bank's Enterprise Surveys cross-country data. It also presents some estimates recovered from the production function. Two versions of the production function are estimated: one Cobb-Douglas, the other a more flexible translog specification. Both estimations are at the two-digit industry level pooling all the Enterprise Surveys data across economies. Evidence is found against using a Cobb-Douglas specification, which is more parsimonious, and in favor of using the flexible translog specification. The resulting firm-level estimates are all published in the Enterprise Surveys database with a unique firm identifier to link to the rest of the Enterprise Surveys data; because the estimates are reliant on new data, they are updated periodically as new Enterprise Surveys data become available. The results show that: (i) median firms operate close to constant returns to scale; (ii) gross-output and value-added production functions provide similar ranking of sectors in terms of output elasticities, capital intensity, and returns to scale; (iii) there is large, firm-level heterogeneity in output elasticities; and (iv) gross-output-based total factor productivity measures are less dispersed than the value-added ones.

New representative survey data for Harare, Zimbabwe are used to analyze the conditions under which informal businesses encounter requests for bribes. A simple model develops basic expectations of bribe exposure: those with higher opportunity costs of formalizing and with a higher ability to pay (resources) are expected to face a higher bribe risk. Empirical results find that informal businesses operating out of necessity are likelier to have a bribe demanded of them. Robustness checks are performed to account for the endogeneity of the main regressors, through a bivariate probit specification, using an instrumental variable of whether an informal business owner started in the area of activity before the country's 2009 dollarization. Limited significant results are found for the effect of revenues (ability to pay).

An expanding body of literature has shown that better management practices can offer significant boosts to firms' productivity; this research illustrates that firms in South America are no exception. Using recent Enterprise Survey data from seven countries in South America (Argentina, Bolivia, Colombia, Ecuador, Paraguay, Peru, and Uruguay), the paper explores the various dimensions and drivers of management practices and analyzes how they are related to productivity. This is an important topic to investigate, given the lagging levels of productivity growth in the region. If management practices can boost firms’ productivity, this may be a cost-effective way to accelerate economic growth. The results show that improved management practices are associated with higher levels of productivity in all countries, and it is the impact of improved management specifically in larger firms that is driving the overall results. Indeed, in some countries, specifically Argentina, Paraguay, and Peru, it is only among larger firms that there is a positive link between management practices and productivity.

A new set of survey questions is used to map governance structures that firms employ to support the successful implementation of transactions. Responses to the questions were collected as part of the Enterprise Surveys in six South American countries. Without imposing any a priori model, latent class analysis (LCA) discovers meaningful patterns of governance structures that readily match constructs in the literature. All governance structures use bilateralism. Bilateralism and formal institutions are sometimes complements, but never substitutes. For each firm, LCA provides estimates of the posterior probability that the firm uses each of the discovered governance structures. These estimates can be used by researchers to go further, testing their own hypotheses relevant to Williamson's discriminating alignment agenda using additional data from the Enterprise Surveys or elsewhere. Variations in the effectiveness of different governance structures across countries and across different types of firms and transactions are explored. Regional variation within countries is greater than cross-country variation. Foreign-owned firms, exporters, larger firms, and better-managed ones are more likely to use governance structures that complement bilateralism with use of the legal system or with the help of paid third-parties.

Creating productive jobs is one of the greatest challenges in Ghana. This paper looks at job creation and its relationship with firm productivity and the quality of jobs among registered firms in the Ghanaian private sector, based on the 2013 World Bank Enterprise Survey. The study looks at the typology of firms in the industry and service sectors, identifying those that have created the most jobs, and the relative quality of these jobs in terms of productivity and firms' average wage bill. Although the formal private sector employs only a tiny share of total employment, the results show that larger and older firms account for the majority of workers, and formal jobs density is highest in Accra (Accra Metropolitan Area and Tema). Large firms also pay higher wages on average, are more productive, and account for most of the aggregate net formal job creation between 2010 and 2012. However, the relationship between size and productivity is positive and statistically significant, mostly driven by the upper part of the firm size distribution, pointing to potential market segmentations as micro, small, and medium firms create fewer jobs and are less productive. Removing barriers to the growth of micro, small, and medium size enterprises, and to the allocation of resources toward more efficient firms should be a key priority for policy makers.

The subject of which firms are the key employers—and which of these create or destroy jobs at a faster rate—is eminently important for academics and policy makers. The relative importance of small versus large firms and old versus young firms has in particular been extensively debated and studied. Nevertheless, the results often hinge on the questions that are asked. Moreover, the categorical definitions used to define firm size and age, and the nature and coverage of the data used have important effects. This paper lays out the relevant definitions and metrics that are central to the debate, reviewing the main findings to date on the subject (with particular emphasis on results in developing economies). The paper adds updated results for 117 developing economies using the World Bank’s Enterprise Survey Data, finding that (i) small and medium enterprises and older establishments are the dominant employers in the nonagricultural private sector labor force in developing economies, and (ii) net job creation is negatively correlated with establishment age and, although the effect of size is also negative, its significance is sensitive to the definition and methods used.