Binding Constraints: Does Firm Size Matter?

Type Journal Article - MPRA Paper
Title Binding Constraints: Does Firm Size Matter?
Publication (Day/Month/Year) 2012
Using Bolivian Örm level data from the World Bank 2010 Enterprise Survey, we attempt to Önd evidence to support the idea that distinct formal Örms (according to their size) have a distinct likelihood of facing obstacles. We propose that a potential endogeneity between Örmsíconstraints and Örm size should be considered. After calculating estimations from an IV-ordered probit with an ordinal endogenous regressor, the results suggest that the Örm size a§ects the constraint level reported by Örms, but not for all kind of obstacles. ëCorruptioní, ëPolitical Instabilityí, and ëCrime, Theft and Disorderíare obstacles which a§ect all Örms; ëElectricityíand ëTransportationíare binding constraints to medium and large Örms; and ëAccess to Financingíis a binding constraint to small Örms. These Öndings are important because they can be directly extrapolated to public policy that is focused on the performance of Örms.

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