Productivity and Resource Misallocation: Empirical Findings from Firms in the Middle East and North Africa (MENA) Region and Turkey

Year 2022, , 1 - 37, 27.01.2022

Eleftherios Gıovanıs , Öznur Özdamar

https://doi.org/10.26650/JEPR1021400

Abstract

State-Business relations (SBRs) are reflected in business and investment climate indicators and may take the form of formal, regular, and informal interactions. The creation of an institutional environment in which the state provides high-quality public goods, such as infrastructure, political stability, elimination of corruption, and effective public administration, is important because it can improve productivity and lead to higher rates of growth. Resource reallocation from low to high productivity firms can generate large aggregate productivity gains with further potential benefits to economic growth. This study examines the relationship between productivity and resource misallocation in a sample of countries in the Middle East and North Africa (MENA) region, and Turkey. The analysis relies on data from the World Bank Enterprise Surveys over 2008-2016 of firms in Egypt, Turkey, and Yemen. In the analysis, we control various firm characteristics. Furthermore, we explore major state-business relations (SBRs) and their association to resource misallocation. The results are mixed, wherein in Egypt and Turkey, female ownership and international quality certification are positively associated with productivity and allocation efficiency. Moreover, obstacles in SBRs present a negative and significant correlation with the firms’ performance and productivity, increasing dispersions in the resource allocation, output, and capital. We find that corruption, political instability, electricity supply, and high tax rates are the most critical obstacles in SBRs.

Keywords

Firm-Level data, Firm characteristic, Productivity, Resource misallocation, State-Business relations

Supporting Institution

Economics Research Forum (ERF)

Project Number

Structural Change, Resource Misallocation and Growth Dynamics in the MENA Region

Thanks

The authors are grateful for the financial support received from the ERF. The authors would like to thank Dr. Jorge Luis Rodriguez Meza, who is Program Manager at the World Bank, and the participants in the ERF-World Bank Workshop and Training on “Structural Change, Resource Misallocation and Growth Dynamics in the MENA Region” on 28th February and 1st March 2018, for their valuable comments and feedback.

Verimlilik ve Kaynakların Etkinsiz Dağılımı: Ortadoğu ve Kuzey Afrika (ODKA) Bölgesi ile Türkiye’deki Firmalardan Elde Edilen Ampirik Bulgular

Abstract

Devlet-Özel Sektör ilişkileri iş ve yatırım ortamı göstergeleri ile ifade edilirken, resmi, düzenli ve gayri resmi ilişkiler şeklinde vücut bulabilir. Devletin yolsuzluğun ortadan kaldırılması, etkin kamu yönetimi, altyapı ve siyasi istikrar gibi yüksek kaliteli kamu malları sağladığı kurumsal bir ortamın yaratılması, verimliliği artırması ve daha yüksek büyüme oranlarına yol açması açısından önemlidir. Düşük verimli firmalardan yüksek verimli firmalara kaynakların yeniden aktarımı, önemli verimlilik kazançlarını beraberinde getirerek ekonomik büyümeye de potansiyel katkılar sunmaktadır. Bu çalışma Orta Doğu ve Kuzey Avrupa’da yer alan bazı ülkeler ile Türkiye’de verimlilik ve kaynakların etkinsiz dağılımı arasındaki ilişkiyi incelemektedir. Analizler Türkiye, Mısır ve Yemen için 2008-2016 yılları arası Dünya Bankası Girişim Anketleri’nden elde edilen veriler kullanılarak yapılmıştır. Analizlerde firma karakteristiklerini temsil eden değişkenler kontrol altına alınmıştır. İlave olarak çalışmada, devlet-özel sektör ilişkisinin kaynakların etkinsiz dağılımındaki rolü incelenmiştir. Sonuçlar ülkeler için farklılık göstermekte olup, Türkiye ve Mısır’da firmaların kadınlar tarafından işletilmesinin ve uluslararası kalite belgesine sahip olunmasının verimlilik ve kaynak dağılımındaki etkinlikle pozitif ilişkili olduğu ortaya koyulmuştur. Ayrıca devlet-özel sektör ilişkisi önündeki engeller firma performansı ve verimliliği ile negatif ilişkili olup, sermaye, çıktı ve kaynak dağılımda bozulmayı beraberinde getirmektedir. Yolsuzluk, siyasi istikrasızlık, elektrik arzı ve yüksek vergi oranları devlet-özel sektör ilişkisi önündeki en kritik engeller olarak bulunmuştur.

Keywords

Firma verisi, Firma özellikleri, Verimlilik, Kaynakların etkinsiz dağılımı, Devlet-Özel sektör ilişkileri

Project Number

Structural Change, Resource Misallocation and Growth Dynamics in the MENA Region

References

• Aga, G., Francis, D.C., & Meza, J.R. (2015). SMEs, Age, and Jobs A Review of the Literature, Metrics, and Evidence. World Bank Policy Research Working Paper 7493. Development Economics, Global Indicators Group. google scholar
• Aga, G., & Francis, D.C. (2017). As the market churns: Productivity and firm exit in developing countries. Small Business Economics, 49(2), 379-403 google scholar
• Asker, J., Collard-Wexler, A., & De Loecker, J. (2014). Dynamic inputs and resource (mis)allocation. Journal of Political Economy, 122(5), 1013-1063. google scholar
• Baldwin, J., & Yan, B. (2011). The death of Canadian manufacturing plants: Heterogeneous responses to changes in tariffs and real exchange rates. Review of World Economics, 147(1), 131-167. google scholar
• Bartelsman, E., Haltiwanger, J., & Scarpetta, S. (2013). Cross-Country differences in productivity: The role of allocation and selection. American Economic Review, 103(1), 305-334. google scholar
• Beck, T., Demirguc-Kunt, A., & Maksimovic, V. (2005). Financial and egal constraints to growth: Does firm size matter? The Journal of Finance, 60(1), 137-177. google scholar
• Beck, T., & Demirguc-Kunt, A. (2006). Small and medium-size enterprises: Access to finance as a growth constraint. Journal of Banking and Finance, 30(11), 2931-2943. google scholar
• Bernard, A., & Sjöholm, F. (2003). Foreign Owners and Plant Survival. NBER Working Papers 10039, Cambridge-Massachusetts, USA google scholar
• Biesebroeck, J.V. (2005). Firm size matters: Growth and productivity growth in African manufacturing. Economic Development and Cultural Change, 53(3), 545-583. google scholar
• Brandt, L., Tombe, T., & Zhu, X. (2013). Factor market distortions across time, space, and sectors in China. Review of Economic Dynamics, 16(1), 39-58. google scholar
• Busso, M., Madrigal, L., & Pages, C. (2013). Productivity and resource misallocation in Latin America. B.E. Journal of Macroeconomics, 13(1), 903-932. google scholar
• Caballero, R.J., Hoshi, T., & Kashyap, A.K. (2008). Zombie lending and depressed restructuring in Japan. American Economic Review, 98(5), 1943-1977. google scholar
• Caggese, A., & Cunat, V (2013). Financing constraints, firm dynamics, export decisions, and aggregate productivity. Review of Economic Dynamics, 16(1), 177-193. google scholar
• Carlin, W., Schaffer, M., & Seabright, P. (2006). Where are the Real Bottle necks? A Lagrangian Approach to Identifying Constraints on Growth from Subjective Data, CERT Discussion Paper 2006/04. Centre for Economic Reform and Transformation, School of Management and Languages, Heriot-Watt University, Edinburgh. google scholar
• Chuah, L.L., Loayza, N.V., & Nguyen, H. (2018). Resource Misallocation and Productivity Gaps in Malaysia. google scholar
• Policy. Research Working Paper 8368. Development Research Group, Macroeconomics and Growth Team google scholar
• Cirera, X., Jaef, R.N.F., & Maemir, H.B. (2017). Taxing the Good? Distortions, Misallocation, and Productivity in Sub-Saharan Africa. Policy Research Working Paper 7949, World Bank Group, Trade and Competitiveness Global Practice Group & Development Research Group. google scholar
• Collier, P., & Duponchel, M. (2013). The economic legacy of civil war: Firm-level evidence from Sierra Leone. Journal of Conflict Resolution, 57(1), 65-88 google scholar
• Coolidge, J. (2012). Findings of tax compliance cost surveys in developing countries. eJournal of Tax Research, 10(2), 250-287 google scholar
• Croson, R., & Gneezy, U. (2009). Gender differences in preferences. Journal of Economic Literature, 47(2), 448474. google scholar
• Diaz, M.A., & Sanchez, R. (2008). Firm size and productivity in Spain: A stochastic frontier analysis. Small Business Economics, 30(3), 315-323 google scholar
• Epifani, P., & Gancia, G. (2011). Trade, markup, heterogeneity and misallocations. Journal of International Economics, 83(1), 1-13. google scholar
• Eslava, M., Haltiwanger, J. C., Kugler, A., & Kugler, M. (2013). Trade reforms and market selection: Evidence from Manufacturing Plants in Colombia. Review of Economic Dynamics, 16(1), 135-158. google scholar
• Evans, C., Lignier, P., & Tran-Nam, B. (2013). Tax Compliance Costs for The Small and Medium Enterprise Business Sector: Recent Evidence from Australia. Discussion Paper 03-13, Exeter: Tax Administration Research Centre, UK. google scholar
• Faccio,M., Marchica, M. T., & Mura, R. (2016). CEO gender and corporate risk-taking. Journal of Corporate Finance, 39(C), 193-209. google scholar
• Gelübcke, J., & Wagner, J. (2012). Foreign ownership and firm survival: first evidence for enterprises in Germany. Economie Internationale, 132(4), 117-139. google scholar
• Gopinath, G., Kalemli-Ozcan, S., Karabarbounis, L., & Villegas-Sanchez, C. (2015). Capital Allocation and Productivity in South Europe. NBER Working Paper No 21453, Cambridge- Massachusetts, USA google scholar
• Guner, N., Ventura, G., & Xu, Y. (2008). Macroeconomic implications of size-dependent policies. Review of Economic Dynamics, 11(4), 721-744. google scholar
• Harhoff, D., Stahl, K., & Woywode, M. (1998). Legal form, growth and exit of West German firms. Journal of Industrial Economics, 46(4), 453-488. google scholar
• Hopenhayn, H., & Rogerson, R. (1993). Job turnover and policy evaluation: A general equilibrium analysis. Journal of Political Economy, 101(5), 915-938. google scholar
• Hsieh, C., & Klenow, P. (2009). Misallocation and manufacturing TFP in China and India. Quarterly Journal of Economics, 124(4), 1403-1448. google scholar
• Hsieh, C., Hurst, E., Jones, C. I., & Klenow, P. (2013). The allocation of talent and us economic growth. NBER Working Paper No. w18693, Cambridge-Massachusetts, USA google scholar
• Lagos, R. (2006). A Model of TFP. Review of Economic Studies, 73(4), 983-1007. google scholar
• Lawless, M. (2014). Age or size? Contributions to job creation. Small Business Economics, 42(4), 815-830. google scholar
• Lea, N., & Hanmer, L. (2009). Constraints to Growth in Malawi. Policy Research Working Paper 5097, Washington DC: The World Bank. google scholar
• Lemma, A., Massa, I., Scott, A., & te Velde, A.W. (2016). What are the links between power, economic growth and job creation? Development Impact Evaluation, Evidence Review, Overseas Development Institute. google scholar
• Leon-Ledesma, M. A., McAdam, P., & Willman, A. (2010). Identifying the elasticity of substitution with biased technical change. American Economic Review, 100(4), 1330-1357 google scholar
• Leon-Ledesma, M. (2016). Potential Growth, Misallocation, and Institutional Obstacles: Firm-Level Evidence. Asian Development Bank. ADB Economics Working Paper Series. google scholar
• Lileeva, A., & Trefler, D. (2010). Improved Access to Foreign Markets Raises Plant-Level Productivity.. .for Some Plants. Quarterly Journal of Economics, 125(3), 1051-1099 google scholar
• Lundvall, K., & Battesse, G.E. (2000). Firm size, age and efficiency: Evidence from Keynesian manufacturing firms. The Journal of Development Studies, 36(3), 146-163 google scholar
• Midrigan, V., & Xu, Y. (2014). Finance and misallocation: Evidence from Plant-Level data. American Economic Review, 104(2), 422-458. google scholar
• Nguyen, H., Taskin, T., & Yilmaz, A. (2016). Resource Misallocation in Turkey. Policy Research Working Paper 7780. World Bank Group, Development Research Group Macroeconomics and Growth Team & Macroeconomics and Fiscal Management Global Practice Group. google scholar
• Oberfield, E. (2013). Productivity and misallocation during a crisis: Evidence from the Chilean crisis of 1982. Review of Economic Dynamics, 16(1), 100-119. google scholar
• Restuccia, D., & Rogerson, R. (2008). Policy distortions and aggregate Productivity with heterogeneous establishments. Review of Economic Dynamics, 11(4), 707-720. google scholar
• Schiffer, M., & Weder, B. (2001). Firm size and the business environment: Worldwide survey results. International google scholar
• Finance Corporation: Discussion Paper 43, Washington D.C., USA. google scholar
• Slemrod, J., & Venkatesh, V. (2002). The income tax compliance cost of large and mid-size businesses. Office of Tax Policy Research, University of Michigan Business School. University of Michigan Business School. google scholar
• World Bank (2008). Kenya: Accelerating and Sustaining Inclusive Growth. Report No. 42844-KE, Washington D.C., USA. google scholar