Comparing Apples with....Apples : How to Make (More) Sense of Subjective Rankings of Constraints to Business
The use of expert or qualitative surveys to rank countries business investment conditions is widespread. However, within the economic literature there are concerns about measurement error and endogeneity based on characteristics of the respondents...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090914154906 http://hdl.handle.net/10986/4246 |
| Summary: | The use of expert or qualitative surveys
to rank countries business investment conditions is
widespread. However, within the economic literature there
are concerns about measurement error and endogeneity based
on characteristics of the respondents, raising questions
about how well the data reflect the underlying reality they
are trying to measure. This paper examines these concerns
using data from 79,000 firms in 105 countries. The findings
show that first, qualitative rankings correlate well with
quantitative measures of the business environment, using
both quantitative measures from within the survey and from
external sources. Second, there are systematic variations
in perceptions based on firm characteristics - focusing in
particular on size and growth performance. However, it is
not that an optimistic view of the business environment is
simply the expression of a firm s own performance. Rather,
firm size and performance affect the relative importance of
certain constraints, particularly in areas such as finance,
time with officials/inspectors, corruption, and access to
reliable electricity. The results also show that much of the
variation in subjective responses by firm types is largely
due to differences in the objective conditions across firm
types. There is little evidence that size and performance
have non-linear effects in how constraining a given
objective condition is reported to be. Overall, concerns
about endogeneity remain in using business environment
indicators to explain firm performance, but this stems
primarily from the fact that who you are and how well you
are doing can affect the conditions you face rather than
whether the indicator used is qualitative or quantitative. |
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