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Identifying Binding Constraints to Growth: Does Firm Size Matter?
Author:
Mr. Mauricio Vargasnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2015: Issue 003
Language:
English
Publication Date:
14 Jan 2015
DOI:
https://doi.org/10.5089/9781498358088.001
ISBN:
9781498358088
ISSN:
1018-5941
Pages:
48
Keywords:
WP; firm size; large firm; constraint level; firm's constraint; representative firm; Firms’ Constraints; IV-Oprobit; Bolivia; binding constraint; constraints relationship; Electricity; Transportation; Tax administration core functions; Corruption
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2015: Issue 003