Firms Constraints in Bolivia: Does Firm Size Matter? Motivation Introduction & Background Stylized Facts for Bolivia Empirical Strategy Results Remarks Firms Constraints in Bolivia: Does Firm Size Matter? JosØ P Mauricio Vargas ARU Foundation July 2011
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Firms are the primary unit of the production process. Iffirms do well...
Doing Business in Bolivia is not an easy issue.
"In the past five years, about 85 percent of the world’seconomies have made it easier for local entrepreneurs tooperate, through 1,511 improvements to businessregulation. Doing Business 2011 pioneers a new measureshowing how much business regulation has changed in 174economies since 2005. China and India are among the top40 most-improved economies. Among the top 30most-improved economies, a third are from Sub-SaharanAfrica." doing business 2011 report
Bolivia is ranked in the 149 position of 186 economies.Bolivia is the second worst country of South America(after Venezuela). Colombia and Peru are the best rankedones: Peru (36) and Colombia (39).
Firms are the primary unit of the production process. Iffirms do well...
Doing Business in Bolivia is not an easy issue.
"In the past five years, about 85 percent of the world’seconomies have made it easier for local entrepreneurs tooperate, through 1,511 improvements to businessregulation. Doing Business 2011 pioneers a new measureshowing how much business regulation has changed in 174economies since 2005. China and India are among the top40 most-improved economies. Among the top 30most-improved economies, a third are from Sub-SaharanAfrica." doing business 2011 reportBolivia is ranked in the 149 position of 186 economies.
Bolivia is the second worst country of South America(after Venezuela). Colombia and Peru are the best rankedones: Peru (36) and Colombia (39).
Firms are the primary unit of the production process. Iffirms do well...
Doing Business in Bolivia is not an easy issue.
"In the past five years, about 85 percent of the world’seconomies have made it easier for local entrepreneurs tooperate, through 1,511 improvements to businessregulation. Doing Business 2011 pioneers a new measureshowing how much business regulation has changed in 174economies since 2005. China and India are among the top40 most-improved economies. Among the top 30most-improved economies, a third are from Sub-SaharanAfrica." doing business 2011 reportBolivia is ranked in the 149 position of 186 economies.Bolivia is the second worst country of South America(after Venezuela). Colombia and Peru are the best rankedones: Peru (36) and Colombia (39).
Financial Constraints —> (-) Firm Size [WBES for Italy](Angelini and Generale,2005)
Liquidity Constraints —> (-) Firm Size [Panel Data forManufacture Sector in Italy] (Fagiolo and Luzzi, 2006)
Financial Constraint —> Firm Size Distribution[Theoretical—> using intertemporal optimization and atwo-period model] (Cooley and Quadrini, 2001; and Cabraland Mata, 2003)
Financial Constraints —> (-) Firm Size [WBES for Italy](Angelini and Generale,2005)
Liquidity Constraints —> (-) Firm Size [Panel Data forManufacture Sector in Italy] (Fagiolo and Luzzi, 2006)
Financial Constraint —> Firm Size Distribution[Theoretical—> using intertemporal optimization and atwo-period model] (Cooley and Quadrini, 2001; and Cabraland Mata, 2003)
Financial Constraints —> (-) Firm Size [WBES for Italy](Angelini and Generale,2005)
Liquidity Constraints —> (-) Firm Size [Panel Data forManufacture Sector in Italy] (Fagiolo and Luzzi, 2006)
Financial Constraint —> Firm Size Distribution[Theoretical—> using intertemporal optimization and atwo-period model] (Cooley and Quadrini, 2001; and Cabraland Mata, 2003)
Level of Obstacle of MACROECONOMIC INSTABILITYto the functioning of the establishment (Proportions offirm with ‘No Obstacle’(Left) and ‘Major and SevereObstacle’(Right))
Level of Obstacle of POLITICAL INSTABILITY to thefunctioning of the establishment (Proportions of firm with‘No Obstacle’(Left) and ‘Major and Severe Obstacle’(Right))
Level of Obstacle of CORRUPTION to the functioning ofthe establishment (Proportions of firm with ‘No Obstacle’(Left) and ‘Major and Severe Obstacle’(Right))
Level of Obstacle of INADEQUATELY EDUCATEDWORKFORCE to the functioning of the establishment(Proportions of firm with ‘No Obstacle’(Left) and ‘Majorand Severe Obstacle’(Right))
Our research objective looks for evidence to support, ifmiddle-class small entrepreneurs are subject to moreintense or less intense constraints from the followingsources of obstacles: Infrastructure and Services;Transport; Informal Sector Practices; Access to Land;Crime; Access to Finance; Government Relations (Taxrates; Tax administration; Business Licensing and Permits;Political Instability; Corruption; Courts); LaborRegulations.
We use the 2006 Bolivian Enterprise Survey databasepublished by the World Bank. It contains 613 observationsat firm level ( World Bank, 2007) from enterprises locatedin the three major cities of Bolivia: La Paz, Cochabambaand Santa Cruz. The strata for Enterprise Surveys are firmsize, business sector, and geographic region within acountry.
We estimate the two-equation model (which consists in anIV ordered probit with and ordinal endogenous regressor).If the correlation coeficient is statistically distinct fromzero, there is evidence of endogeneity.
Empirical Estrategy - The Model considering apotential endogenous regressor
Our set of control variables (X1) includes: productionsector, city, firm´s current legal status, percent of the firmdoes the largest shareholder own, principal owner gender,origin of the investment financing needed to start thestablishment, years of experience of the top manager,international-recognized quality certification status.
In the other hand, our potential instruments, or excludedvariables (X2), for the firm size (Y2) are: the stablishmentbelongs to a larger firm, full time employees when thestablishment started operations, legal status of the firmwhen it started operations, age of firm.
Bolivia does not count on public policy oriented to thefirms’improvement.
The paper attempts to identify which kind of firms faceworse obstacles.In this context, we try to identify if differences in firm’ssize imply differences in the perceived obstacles.We found enough evidence to consider a potentialendogeneity between firm’s size and firm’s constraints.We use a novel estimation method to detect endogeneityproblems in a model with an ordinal endogenous variablewith an ordinal endogenous regressor.The results suggests that firm size is important and coulbe affecting the level of obstacles that firms face.Based in the results, the public policies oriented to firms’improvement should take into account the firm’s size.
Bolivia does not count on public policy oriented to thefirms’improvement.The paper attempts to identify which kind of firms faceworse obstacles.
In this context, we try to identify if differences in firm’ssize imply differences in the perceived obstacles.We found enough evidence to consider a potentialendogeneity between firm’s size and firm’s constraints.We use a novel estimation method to detect endogeneityproblems in a model with an ordinal endogenous variablewith an ordinal endogenous regressor.The results suggests that firm size is important and coulbe affecting the level of obstacles that firms face.Based in the results, the public policies oriented to firms’improvement should take into account the firm’s size.
Bolivia does not count on public policy oriented to thefirms’improvement.The paper attempts to identify which kind of firms faceworse obstacles.In this context, we try to identify if differences in firm’ssize imply differences in the perceived obstacles.
We found enough evidence to consider a potentialendogeneity between firm’s size and firm’s constraints.We use a novel estimation method to detect endogeneityproblems in a model with an ordinal endogenous variablewith an ordinal endogenous regressor.The results suggests that firm size is important and coulbe affecting the level of obstacles that firms face.Based in the results, the public policies oriented to firms’improvement should take into account the firm’s size.
Bolivia does not count on public policy oriented to thefirms’improvement.The paper attempts to identify which kind of firms faceworse obstacles.In this context, we try to identify if differences in firm’ssize imply differences in the perceived obstacles.We found enough evidence to consider a potentialendogeneity between firm’s size and firm’s constraints.
We use a novel estimation method to detect endogeneityproblems in a model with an ordinal endogenous variablewith an ordinal endogenous regressor.The results suggests that firm size is important and coulbe affecting the level of obstacles that firms face.Based in the results, the public policies oriented to firms’improvement should take into account the firm’s size.
Bolivia does not count on public policy oriented to thefirms’improvement.The paper attempts to identify which kind of firms faceworse obstacles.In this context, we try to identify if differences in firm’ssize imply differences in the perceived obstacles.We found enough evidence to consider a potentialendogeneity between firm’s size and firm’s constraints.We use a novel estimation method to detect endogeneityproblems in a model with an ordinal endogenous variablewith an ordinal endogenous regressor.
The results suggests that firm size is important and coulbe affecting the level of obstacles that firms face.Based in the results, the public policies oriented to firms’improvement should take into account the firm’s size.
Bolivia does not count on public policy oriented to thefirms’improvement.The paper attempts to identify which kind of firms faceworse obstacles.In this context, we try to identify if differences in firm’ssize imply differences in the perceived obstacles.We found enough evidence to consider a potentialendogeneity between firm’s size and firm’s constraints.We use a novel estimation method to detect endogeneityproblems in a model with an ordinal endogenous variablewith an ordinal endogenous regressor.The results suggests that firm size is important and coulbe affecting the level of obstacles that firms face.
Based in the results, the public policies oriented to firms’improvement should take into account the firm’s size.
Bolivia does not count on public policy oriented to thefirms’improvement.The paper attempts to identify which kind of firms faceworse obstacles.In this context, we try to identify if differences in firm’ssize imply differences in the perceived obstacles.We found enough evidence to consider a potentialendogeneity between firm’s size and firm’s constraints.We use a novel estimation method to detect endogeneityproblems in a model with an ordinal endogenous variablewith an ordinal endogenous regressor.The results suggests that firm size is important and coulbe affecting the level of obstacles that firms face.Based in the results, the public policies oriented to firms’improvement should take into account the firm’s size.