Does Investment Climate Matter for Firm's Technical Efficiency? An Application to Middle Eastern and North African Manufacturing

Drawing on World Bank enterprise surveys, this paper shows that investment climate (IC) is correlated with firms' technical efficiency (TE) in eight manufacturing industries of 22 developing countries. Essential aspects of IC include the quality of infrastructure, the experience and education o...

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Bibliographic Details
Published in:Journal of international development 2015-10, Vol.27 (7), p.1267-1293
Main Authors: Kinda, Tidiane, Plane, Patrick, Véganzonès-Varoudakis, Marie-Ange
Format: Article
Language:English
Subjects:
Access
Banking
Competition
Correlation analysis
Developing countries
Efficiency
Financial support
firms' survey data
Foreign direct investment
Foreign investment
investment climate
Investments
LDCs
Manufacturers
Manufacturing
Middle East
Middle-East and North-Africa
North Africa
Public debt
Public finance
Studies
technical efficiency
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Summary:Drawing on World Bank enterprise surveys, this paper shows that investment climate (IC) is correlated with firms' technical efficiency (TE) in eight manufacturing industries of 22 developing countries. Essential aspects of IC include the quality of infrastructure, the experience and education of the labour force, the cost of and access to financing, and different dimensions of government–business relations. The empirical analysis also illustrates that IC deficiencies in many Middle‐East and North‐Africa countries are associated with low TE. The exception is Morocco and, to some extent, Saudi‐Arabia, where the IC and TE rank close to that of the sample's most efficient economies. The paper also highlights that industries more exposed to international competition, as well as small and medium domestic firms, exhibit a higher sensitivity to IC limitations. Copyright © 2014 John Wiley & Sons, Ltd.
ISSN:0954-1748
1099-1328
DOI:10.1002/jid.3031