Bhaumik, S.K. orcid.org/0000-0002-4459-3659, Dimova, R., Kumbhakar, S.C. et al. (1 more author) (2018) Is tinkering with institutional quality a panacea for firm performance? Insights from a semiparametric approach to modeling firm performance. Review of Development Economics, 22 (1). pp. 1-22. ISSN 1363-6669
Abstract
There is a large and growing literature on the impact of institutional quality on economic performance and the broad consensus is that \good" institutions facilitate better economic performance. The literature that provides micro-level support for the policy discourse about institutional quality does not, however, account for significant intra-country variation reactions of firms to changes in business environments, even within the same industry, and it by and large ignores the possibility that the impact of institutional quality on firm performance may not be neutral. In this paper, we analyze the impact of institutions on firm performance using an approach that enables us to overcome these problems with the stylized approach. Using cross-country firm level data, we demonstrate that not only does the marginal impact of institutional quality vary significantly within countries, but also that the impact is economically significant only at the two extremes of the distribution. We view this as prima facie evidence that policies that tinker with institutional quality on the basis of the popular wisdom about the impact of these institutions on the average firm may not have the desired or expected impact, at least at the micro-level.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2017 John Wiley & Sons Ltd. This is an author produced version of a paper subsequently published in Review of Development Economics. Uploaded in accordance with the publisher's self-archiving policy. |
Keywords: | Institutional quality; Firm performance; Marginal effect; Textiles industry |
Dates: |
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Institution: | The University of Sheffield |
Academic Units: | The University of Sheffield > Faculty of Social Sciences (Sheffield) > Management School (Sheffield) |
Depositing User: | Symplectic Sheffield |
Date Deposited: | 22 Feb 2017 11:56 |
Last Modified: | 10 Nov 2023 16:25 |
Status: | Published |
Publisher: | Wiley |
Refereed: | Yes |
Identification Number: | 10.1111/rode.12311 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:112612 |