Working papers

It is often argued that small firms are more flexible than large firms. As a result, small firms perform better in volatile markets compared to large firms. The present paper explores this idea for a representative sample of private hotels in Malaysia. Specifically, the paper estimates the impact of volatility in occupancy rates on the pure technical efficiency of small versus large hotels. A slack-based non-radial efficiency measure obtained from the data envelopment analysis methodology is used. The empirical results confirm that smaller hotels are better at dealing with volatility than large hotels are. That is, there is a positive and significant impact of higher volatility on the efficiency of relatively small hotels, a negative and significant impact on the efficiency of larger hotels, and no significant impact on the efficiency of the average hotel. Higher women’s ownership also helps hotels to deal with volatility. The paper discusses the policy implications of the findings. 


In this paper, we assess the impact of commercial registration of household enterprises on their labor productivity and profits. Based on the 2012 and 2018 rounds of the Egyptian Labor Market Panel Surveys, we employ an instrumental variable strategy and find a positive effect of formal registration on profit and a much higher positive effect on labor productivity. The main channels are higher capital intensity and assets. In addition to the owner's gender and education level, labor productivity varies mainly with firms' assets and shared ownership, while profits are mostly determined by the age of the firm and that of its owner. We also find that the positive effect of formality on performance holds for a select category of owners and firms. Finally, our analysis allows us to identify different policy intervention tools for household firms according to their productivity levels and their distance to a threshold of formality fixed costs.


This paper uses a rich panel data set of Indian manufacturing firms to analyze the effects of foreign direct investment (FDI) on various outcomes of domestic firms. We apply recent methodological advances in the estimation of production functions together with detailed product-level information on prices and quantities to estimate physical productivity, markups and marginal costs. Our results indicate the importance of price adjustments which stem from competitive pressure and a pass-through of cost savings to consumers. In line with the previous literature, we find little evidence for spillovers based on commonly used measures of revenue productivity. In contrast, we measure sizable efficiency gains using measures that are not affected by pricing heterogeneity, such as marginal costs and physical productivity. Exploiting exogenous variation from India's FDI liberalization, we provide evidence that the relationship between exposure to FDI and efficiency is causal. Our results suggest that knowledge spills over across product categories within industries and mainly benefits producers of high-quality products. We also provide evidence that FDI spillovers are stronger for joint ventures and when foreign investors enter via acquisitions.


This paper investigates the role of informal firms’ competition in determining the micro-level effect of cronyism on formal-firms’ productivity in the aftermath of the 2011 Egyptian revolution. Based on the World Bank panel Enterprise Surveys, we follow a constructive approach to indicate politically connected firms based on the findings of the previous literature. Using a propensity score reweighting - difference-in-difference estimator, we find that being a crony firm after the revolution could generate unsustainable gains in terms of productivity. This is mostly due to cronyism externalities that engenders a stronger intensity of informal competition, which jeopardizes any increase in productivity and creates a large disequilibrium at the firm level. We also provide evidence that crony firms’ excess in labor is the main channel through which this effect occurs. Hence, crony firm survival in Egypt depends on their ability to balance between the sustain provision of privileges and the threats imposed by the growth of the informal sector.  


Work in progress

The paper makes an initial attempt to account for differences in the technologies used by women- and men-run businesses, that is, technological “heterogeneity”, to better understand productivity differences between the two groups. We do so by applying meta frontier analysis to the efficiency of private hotels in Georgia estimated using data envelopment analysis (DEA) methodology. The exercise allows us to distinguish between productivity differences conditional on the available technology to each group (technical efficiency) and due to differences in the available technology (technology gap). We show that gender-based differences in technical efficiency and technology gap are very different in their direction, size, and distribution across low vs. high levels of efficiency. For example, women-run hotels outperform men-run hotels in technical efficiency by 21 percentage points. However, this superior performance is almost fully countered by the inferior technology used by women due to the prevailing socio-cultural and economic environment. We also uncover that the impact of technology gap in widening the productivity gap is much stronger at low levels of efficiency than at higher levels (the “sticky floors” effect). No such evidence is found for technical efficiency or overall efficiency. Thus, the existing literature, which assumes technological “homogeneity”, provides at best an incomplete picture of the true nature of gender-based productivity gaps and at worst, a misleading one. Our main result survives endogeneity checks based on propensity score matching and is robust to several measures of productivity and outlier checks. Policy implications of the findings are discussed.

This paper analyzes the effects of horizontal mergers in Indian manufacturing. Detailed information on prices and quantities at the level of narrowly defined product categories allows us to identify merger-pairs with product overlap and non-merging rival firms across a broad set of industries. We apply recent methodological advances in the estimation of production functions to estimate markups, marginal costs and proxies for product quality. Our results indicate that, on average, mergers are associated with increases in prices and markups within the merged entity and its competitors while there is little evidence for cost savings. Further, average product quality seems to increase within merging firms.