Investment Climate and International Integration

By David L. Dollar, Mary C. Hallward-Driemeier, T. Mengistae. 2004

273 citations recorded by the source corpus.

Drawing on recently completed firm-level surveys in Bangladesh, Brazil, China, Honduras, India, Nicaragua, Pakistan, and Peru, this paper investigates the relationship between investment climate and international integration. These standardized surveys of large, random samples of firms in common sectors reveal how firms experience bottlenecks and delays in hard infrastructure such as power and telecom as well as in soft infrastructure such as customs administration. The authors focus primarily on measures of the time or monetary cost of different bottlenecks (e.g., days to clear goods through customs, days to get a telephone line, sales lost to power outages). For many of these costs, the obstacles are lower in China than in the South Asian or Latin American countries. There is also systematic variation across cities within countries. The authors estimate a probit function for the probability that a randomly chosen firm is foreign-invested and a separate probit for the probability that a randomly chosen firm is an exporter. These measures of international integration are higher where investment climate is better. For locations to take advantage of opportunities in the international market, they need good infrastructure and a sound regulatory environment. The interaction of openness and sound investment climate creates a good environment for investment and production. This paper helps explain why China has been so successful over the past decade, both in terms of integration and of rapid growth, while other countries have had varied success.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/1f0b7391317d89ffeb149c671a07c348cb3ada39

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Citations in the corpus

Business Environment, Exports, Ownership, and Firm Performance (2011, background): “Dollar, Hallward-Driemeier, and Mengistae (2005) use surveys from eight developing countries covering nearly 6,500 firms to look at the association between exporting and the investment climate.”
The Impact of Logistics Performance on Trade (2013, background): “Dollar et al. (2004) ﬁnd that ﬁrms in countries with a better investment climate, including better logistics, have a higher probability of exporting to international markets and attracting foreign direct investment.”
Global Logistics Indicators, Supply Chain Metrics, and Bilateral Trade Patterns (2005, background): “Dollar, Hallward-Driemeier, and Mengistae (2004) find that firms in countries with a better investment climate, including better logistics have a higher probability of exporting to international markets and attracting foreign direct investment.”
Releasing Constraints to Growth or Pushing on a String? Policies and Performance of Mexican Micro-Firms (2009, methodology): “…available at www.informaworld.com/fjds ISSN 0022-0388 Print/1743-9140 Online/09/071027-21 ª 2009 Taylor & Francis DOI: 10.1080/00220380802264911 productivity and growth (recent examples include Dollar et al., 2005, 2006; Klapper et al., 2006; for a literature review see Banerjee and Duflo, 2005).”
Assessing the Impact of the Investment Climate on Productivity Using Firm-Level Data: Methodology and the Cases of Guatemala, Honduras, and Nicaragua (2005, unknown): “…and business environment - can significantly and adversely impact productivity, growth and economic activity (see Bosworth and Collins, 2003; Dollar et al., 2004; Rodrik and Subramanian, 2004; Loayza, Oviedo and Serven, 2004; McMillan, 1998 and 2004; OECD, 2001; Wilkinson, 2001; Alexander…”
Has the Internet Fostered Inclusive Innovation in the Developing World (2016, methodology): “Seker (2012) and Dollar et al. (2006) apply a similar approach to identify impacts of business conditions on firm performance.”