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This paper studies the interaction between entry barriers and idiosyncratic distortions in the context of a standard model of firm dynamics. It derives a strategy to infer entry barriers based on the combination of cross-country data on average firm size, cross-country estimates of idiosyncratic distortions, and equilibrium conditions of the theory. It finds sizable entry barriers that correlate positively with income per-capita. The TFP gains from complete reversals of distortions range between 20 and 50 percent. Idiosyncratic distortions are most distortive in low income countries whereas entry barriers are relatively more detrimental in advanced economies. The study also finds that distortions tend to mitigate each other's negative effect on TFP.

Entry Barriers --- Firm Size --- Misallocation --- Private Sector Development --- Private Sector Economics --- Productivity

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An analysis of panel data on individuals in a random selection of urban households in Ethiopia reveals large, sustained, and unexplained earnings gaps between public and private, and formal and informal sectors over the period 1994-2004. The authors have no formal evidence whether these gaps reflect segmentation of the labor market along either of these divides. In other words, they cannot show whether they are at least in part due to impediments to entry in the higher wage sector. But they do have evidence that, if segmentation explains any part of the observed earnings gaps, then it could only have weakened over the survey decade. The authors find, first, that the rate of mobility increased between the two pairs of sectors. Sample transition rates grew across survey waves, while state dependence in sector choice decreased. Second, the sensitivity of sector choice to earnings gaps increased over the same period. In particular, the role of comparative earnings in selection into the informal sector was evident throughout the survey decade and increased in magnitude over the second half of the period.

Employment --- Entry Barriers --- Formal Sector Wage --- Informal Sector --- Job --- Jobs --- Labor --- Labor Market --- Labor Market Indicators --- Labor Markets --- Private Sector --- Private Sector Wage --- Public Sector Employees --- Social Protections and Labor --- Unemployed --- Wage Differentials --- Wage Employment --- Wage Premiums --- Wage Sector --- Worker --- Workers

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Over the past 25 years, India's economy grew at an average real rate of close to 6 percent, with growth rates in recent years accelerating to 9 percent. Yet by 2005-06, the general government debt-to-GDP ratio was 34 percentage points higher than in the 1980s. The authors examine the links between public finances and growth in the post-1991 period. They argue that the main factor in the deterioration of government debt dynamics after the mid-1990s was a reform-induced loss in trade, customs, and financial repression taxes. Over time, these very factors plus lower entry barriers have contributed to stronger microfoundations for growth by increasing competition and hardening budget constraints for firms and financial sector institutions. The authors suggest that the impressive growth acceleration of the past few years, which is now lowering government indebtedness, can be attributed to the lagged effects of these factors, which have taken time to attain a critical mass in view of India's gradual reforms. Similarly, the worsening of public finances during the late 1990s can be attributed to the cumulative effects of tax losses, the negative growth effects of cuts in capital expenditure that were made to offset the tax losses, and a pullback in private investment (hence, growth and taxes), a situation which is now turning around. Insufficient capital expenditures have contributed to the infrastructure gap, which is seen as a constraint especially for rapid growth in manufacturing. The authors discuss ongoing reforms in revenue mobilization and fiscal adjustment at the state level, which if successfully implemented, will result in a better alignment of public finances with growth by generating further fiscal space for infrastructure and other development spending.

Access to Finance --- Banks and Banking Reform --- Budget constraints --- Debt Markets --- Economic Theory and Research --- Emerging Markets --- Entry barriers --- Expenditure --- Expenditures --- Finance and Financial Sector Development --- Government debt --- Government indebtedness --- Indebtedness --- Macroeconomics and Economic Growth --- Private investment --- Private Sector Development --- Public finances --- Tax

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March 2000 - How to make firm-level surveys more consistent, yielding data more relevant to policy analysis. The World Bank has increasingly focused on firm-level surveys to build the data foundation needed for accurate policy analysis in developing and transition economies. Recanatini, Wallsten, and Xu take stock of some recent Bank surveys and discuss how to improve their results. Lessons on data issues and hypothesis testing: Use panel data, if possible; Have enough information about productivity to estimate a production function; Avoid the paradigm of list the severity of the obstacle/problem on a scale of 1 to 5. Instead, ask for data on specific dimensions of the problem that will shed light on alternative hypotheses and policy recommendations; Pick particular disaggregated industries and sample those industries in each survey; Identify the most important policy interventions of interest and consider how you will empirically identify specific changes by picking instruments useful for doing so. Lessons on questionnaire design: Incorporate only one idea or dimension in each question. Do not ask, in one question, about the quality, integrity, and efficiency of services, for example; Consider the costs and benefits of numeric scales compared with adjectival scales. Scales in which each point is labeled may be more precise than numeric scales in which only the endpoints are labeled. But responses are very sensitive to the exact adjective chosen and it may be impossible to translate adjectives precisely across languages, making it impossible to compare responses across countries; Recognize that the share of respondents expressing opinions will be biased upward if the survey does not include a middle (indifferent or don't know) category and downward if it does include the middle category; When asking degree-of-concern and how-great-an-obstacle questions, consider first asking a filter question (such as Do you believe this regulation is an obstacle or not?). If the answer is yes, then ask how severe the obstacle is; Be aware of the effects of context. The act of asking questions can affect the answers given on subsequent, related questions; Think carefully about how to ask sensitive questions. Consider using a self-administered module for sensitive questions. Alternatively, a randomized response mechanism may be a useful, truth-revealing mechanism. This paper - a product of Regulation and Competition Policy, Development Research Group - is part of a larger effort in the group to develop consistent cross-country firm level surveys. The authors may be contacted at frecanatini@worldbank.org, wallsten@leland.stanford.edu, or lxu1@worldbank.org.

Accounting --- Bankruptcy --- Banks and Banking Reform --- Capital Stock --- Corporate Governance --- Debt Markets --- Developing Countries --- E-Business --- Economic Theory and Research --- Emerging Markets --- Entry Barriers --- Finance and Financial Sector Development --- Financial Literacy --- Firm Performance --- Future --- Goods --- Human Capital --- ICT Policy and Strategies --- Information and Communication Technologies --- Investment --- Labor Policies --- Macroeconomics and Economic Growth --- Market --- Market Environment --- Market Structure --- Micro Data --- Microfinance --- Political Economy --- Private Sector Development --- Share --- Social Protections and Labor --- Stock --- Transaction --- Transition Countries --- Transition Economies

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Happily, the revolution going on in the telecommunications industry is benign. Technological change and competition are making possible changes considered improbable even 15 years ago. The WTO Agreement on Basic Telecommunications Services created a new regime for the world market. Now we must pay close attention to regulatory fundamentals. Every country serious about introducing competition finds that the transition from monopoly to competition is both economically rewarding and laden with policy dilemmas. As a new century begins, we have an essentially new market for telecommunications. Digital technology forced a reexamination of the opportunity costs of protecting traditional telecommunications equipment and service suppliers. An inefficient market for telecommunications threatened competitiveness in the computer, software, and information industry markets. Meanwhile, after dislocations created by global stagflation through the early 1980s, developing countries became interested in privatization of state enterprises as a tool of economic reform-and state telephone companies were especially promising targets for privatization. Those countries began exploring options for allowing selective competition, as phone companies in major industrial countries began looking to foreign markets for new business opportunities. The WTO Agreement on Basic Telecommunications Services created a new regime for the world market. Now we must pay close attention to regulatory fundamentals: Low barriers to entry in the market for communications services; Effective rebalancing of rates for services during the market transition; Strong interconnection policies; The creation of independent regulatory authorities with the resources and power necessary to foster competition and safeguard consumer welfare. Cowhey and Klimenko assess how developing and transition economies have fared in profiting from changes in the telecommunications market. They also examine the policy challenges that remain, paying special attention to the global market and regulatory milieu fostered by the 1997 WTO agreement. They ask what this latest transformation has taught us about wise management of this vital part of the world economy's infrastructure. They focus on the economics of managing the transition to competition, the design of proper regulatory policies and processes, and the embedding of domestic telecommunications in the world market. This paper-a product of Trade, Development Research Group-is part of a larger effort in the group to help developing countries formulate negotiating positions for WTO talks. Mikhail Klimenko may be contacted at mklimenko@ucsd.edu.

Debt Markets --- Developing Countries --- E-Business --- Economic Policies --- Economic Theory and Research --- Education --- Education for the Knowledge Economy --- Emerging Markets --- Entry Barriers --- Equipment --- Finance and Financial Sector Development --- Future --- Global Market --- ICT Policy and Strategies --- Industry --- Information and Communication Technologies --- Interest --- International Financial Markets --- Macroeconomic Policy --- Macroeconomics and Economic Growth --- Market Access --- Market Efficiency --- Markets --- Markets and Market Access --- Opportunity Costs --- Option --- Options --- Private Sector Development --- Public Sector Corruption and Anticorruption Measures --- Public Sector Economics and Finance --- Regulatory Authority --- Regulatory Systems --- Tariffs --- Technology Industry --- Telecommunications --- Transition Economies