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Size, age, sector, and productivity are commonly cited as factors determining a firm's survival. However, there are several dimensions of the investment climate in which the firm operates that affect whether it continues in business or exits. This paper uses new panel data from 27 Eastern European and Central Asian countries to test the importance of five areas of the business climate on firm exit: the efficiency of government services, access to finance, the extent of corruption or cronyism, the strength of property rights, and the degree of competition. The paper finds that weaknesses in these areas do affect the probability of firm exit - largely in ways that undermine the Schumpeterian cleansing role of exit in raising overall productivity. Greater costs and regulatory burdens raise the probability that more productive firms exit, while less developed financial and legal institutions mitigate forces that would otherwise push less productive firms to exit. Thus, the more productive firms stand to gain the most from improvements in the investment climate, whether that is lowering transaction costs or improving market mechanisms. This holds both within countries and across countries. The impact of a particular investment climate measure can also differ significantly by type of firm, with the focus given to firm size. The differential impact on size can be significant at a size cutoff of 10 or more employees. As these are the firms that are near the threshold of many regulatory requirements, the implications are not just with regard to whether a firm remains in operation, but whether it does so in the formal sector.

Access to credit --- Access to Finance --- Access to finance --- Access to loans --- Bribes --- Corruption --- Debt Markets --- Emerging Markets --- Employee --- Environmental Economics and Policies --- Finance and Financial Sector Development --- Financial institutions --- Financial markets --- Financial services --- Financial system --- Fixed costs --- International Bank --- Investment decisions --- Labor market --- Microfinance --- Multinational --- Multinationals --- Private Sector Development --- Property Rights --- Red tape --- Transaction costs --- Transactions costs

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This paper describes important trade-offs that microfinance practitioners, donors, and regulators navigate. Drawing evidence from large, global surveys of microfinance institutions, the authors find a basic tension between meeting social goals and maximizing financial performance. For example, non-profit microfinance institutions make far smaller loans on average and serve more women as a fraction of customers than do commercialized microfinance banks, but their costs per dollar lent are also much higher. Potential trade-offs therefore arise when selecting contracting mechanisms, level of commercialization, rigor of regulation, and the extent of competition. Meaningful interventions in microfinance will require making deliberate choices - and thus embracing and weighing tradeoffs carefully.

Access to Finance --- Banks --- Banks and Banking Reform --- Collateral --- Debt Markets --- Deposit --- Emerging Markets --- Entrepreneurs --- Finance and Financial Sector Development --- Financial Access --- Financial services --- Information asymmetries --- Interest rates --- International Bank --- Loan --- Loan size --- Loan sizes --- Microfinance --- Microfinance institutions --- Operating costs --- Private Sector Development --- Profitability --- Remittance --- Rural Development --- Rural Finance --- Savings --- Transaction costs --- Transactions costs

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• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Size, age, sector, and productivity are commonly cited as factors determining a firm's survival. However, there are several dimensions of the investment climate in which the firm operates that affect whether it continues in business or exits. This paper uses new panel data from 27 Eastern European and Central Asian countries to test the importance of five areas of the business climate on firm exit: the efficiency of government services, access to finance, the extent of corruption or cronyism, the strength of property rights, and the degree of competition. The paper finds that weaknesses in these areas do affect the probability of firm exit - largely in ways that undermine the Schumpeterian cleansing role of exit in raising overall productivity. Greater costs and regulatory burdens raise the probability that more productive firms exit, while less developed financial and legal institutions mitigate forces that would otherwise push less productive firms to exit. Thus, the more productive firms stand to gain the most from improvements in the investment climate, whether that is lowering transaction costs or improving market mechanisms. This holds both within countries and across countries. The impact of a particular investment climate measure can also differ significantly by type of firm, with the focus given to firm size. The differential impact on size can be significant at a size cutoff of 10 or more employees. As these are the firms that are near the threshold of many regulatory requirements, the implications are not just with regard to whether a firm remains in operation, but whether it does so in the formal sector.

Access to credit --- Access to Finance --- Access to finance --- Access to loans --- Bribes --- Corruption --- Debt Markets --- Emerging Markets --- Employee --- Environmental Economics and Policies --- Finance and Financial Sector Development --- Financial institutions --- Financial markets --- Financial services --- Financial system --- Fixed costs --- International Bank --- Investment decisions --- Labor market --- Microfinance --- Multinational --- Multinationals --- Private Sector Development --- Property Rights --- Red tape --- Transaction costs --- Transactions costs

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Indian gross domestic product per capita increased rapidly between 2001 and 2006 in a climate of increasing services trade, with the export-oriented services sector responsible for rising shares of growth in gross domestic product. Due to its contribution to aggregate economic growth, there is a great need for empirical examination of the distributional consequences of this growth, especially in light of the challenges in obtaining theoretical solutions that can be generalized. This paper fills this gap in the literature by using a global simulation model to examine how sensitive factor incomes across different industries may have been to the historical changes in India's services exports and imports, and provides insight on the distribution of the national income growth attributable to the expansion of the services industry. Rent on capital in the service sector and wages of all workers would have increased as a result of greater services trade in this period, while income from capital specific to agriculture and manufacturing would have declined. The factors involved with the urban-based services sector may thus benefit from the services trade growth, while the total factor income involved in rural agriculture may decline.

Agriculture --- Economic Theory & Research --- Elasticity --- Elasticity of substitution --- Emerging Markets --- Equilibrium --- Exports --- GDP --- GDP per capita --- Gross domestic product --- Gross domestic product per capita --- Growth theories --- ICT Policy and Strategies --- Information and Communication Technologies --- International Economics and Trade --- Labor Policies --- Macroeconomics and Economic Growth --- National income --- Private Sector Development --- Product differentiation --- Production functions --- Real gdp --- Social Protections and Labor --- Statistical analyses --- Telecommunications --- Trade barriers --- Trade Policy --- Transactions costs --- Value added --- Wages