Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/89965 
Year of Publication: 
2014
Series/Report no.: 
IZA Discussion Papers No. 7886
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
We introduce a novel approach to modeling the impact of institutional quality on firm performance. Our methodology enables us to estimate the marginal effect of institutional quality on TFP, factor inputs and output of each firm, which gives us within-country distributions of these effects and hence a better picture of the winners and losers associated with a particular level of institutional quality. We are also able to model marginal impact of institutional quality on both TFP and the efficiency of use of factor inputs, and hence on output. This is a departure from stylized approaches that focus on the impact on TFP alone, and our approach therefore informs policy discussions about the impact of institutional quality (and their change) on shares of factor inputs in the output. We use cross-country firm-level data for the textiles and garments sector to demonstrate the advantages of this modeling approach in analyzing the impact of institutional quality.
Subjects: 
institutional quality
firm performance
marginal effect
textiles industry
JEL: 
C14
D24
K31
O43
Document Type: 
Working Paper

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