Global Practice on Trade and Competitiveness, The World Bank
Author Name Variants
Fields of Specialization
Global Practice on Trade and Competitiveness, The World Bank
Externally Hosted Work
Last updated January 31, 2023
Publication Search Results
Now showing 1 - 9 of 9
Publication(World Bank, Washington, DC, 2013-09) González, Alvaro S. ; Iacovone, Leonardo ; Subhash, HariThe need for economic diversification receives a great deal of attention in Russia. This paper looks at a way to improve it that is essential but largely ignored: how to help diversifying firms better survive economic cycles. By definition, economic diversification means doing new things in new sectors and/or in new markets. The fate of emerging firms, therefore, should be of great concern to policy makers. This paper indicates that the ups and downs -- the volatility -- of Russian economic growth are key to that fate. Volatility of growth is higher in Russia than in comparable economies because its slumps are both longer and deeper. They go beyond the cleansing effects of eliminating the least efficient firms; relatively efficient ones get swept away as well. In fact, an incumbency advantage improves a firm's chances of weathering the ups and downs of the economy, regardless of a firm's relative efficiency. Finally, firms in sectors where competition is less intense are less likely to exit the market, regardless of their relative efficiency. Two policy conclusions emerge from these findings -- one macroeconomic and one microeconomic. First, the importance of countercyclical policies is heightened to include efficiency elements. Second, strengthening competition and other factors that support the survival of new, emerging and efficient firms will promote economic diversification. Efforts to help small and medium enterprises may be better spent on removing the obstacles that young, infant firms face as they attempt to enter, survive and grow.
Publication(World Bank, Washington, DC, 2008-09) Iacovone, Leonardo ; Javorcik, Beata S.Recent developments in trade theory, especially research on multi-product firms, have not been matched by similar progress on the empirical front. This paper aims to fill this gap by presenting a novel set of stylized facts on firm-product dynamics observed during an export boom. This exercise is possible thanks to a unique firm-product level dataset covering about 85 percent of Mexican industrial output for the period 1994-2003. The main findings are as follows. First, there is a substantial degree of product turnover at the firm-product level in response to declining trade costs. Second, "core competencies" - the fact that firms have a cost advantage or greater expertise at manufacturing some of their products - are the main driver of firms' decision to introduce or drop export products. Third, new exporters tend to "start small" in terms of both values and number of exported products. Fourth, even if the expansion in the number of exported products played a role in stimulating Mexican exports, the growth in volume of pre-existing products was the main driver of the export boom. Finally, the introduction of new export products is preceded by a surge in investment. These findings are in line with many, but not all, predictions of recent theoretical work.
Publication(World Bank, Washington, DC, 2012-06) Varela, Gonzalo ; Aldaz-Carroll, Enrique ; Iacovone, LeonardoThis paper investigates the determinants of price differences and market integration among Indonesian provinces, using data from retail cooking oil, rice and sugar markets during the period 1993-2007, and from wholesale maize and soybean markets during the period 1992-2006. The authors measure the degree of integration using co-integration techniques, and calculate average price differences. They use regression analysis to understand the drivers of price differences and market integration. For rice and sugar, they find wide market integration and low price differences, in the range of 5-12 percent. For maize, soybeans and cooking oil, they find less integration and higher price differences (16-22 percent). Integration across provinces is explained by the remoteness and quality of transport infrastructure of a province. Price differences across provinces respond to differences in provincial characteristics such as remoteness, transport infrastructure, output of the commodity, land productivity and income per capita.
Publication(World Bank, Washington, DC, 2015-11) Iacovone, Leonardo ; Sanchez-Bayardo, Luis F. ; Sharma, SiddharthThis paper examines whether labor productivity converged across Peru’s regions (“departments”) during 2002-12. Given the large differences in labor productivity across the regions of Peru, such convergence has the potential to raise aggregate productivity and incomes, and also reduce regional inequalities. The paper finds that labor productivity in the secondary sector (especially manufacturing) and the mining sector has converged across Peruvian departments. The paper does not find robust evidence for labor productivity convergence in agriculture and services. These patterns are consistent with recent cross-country evidence and with the hypothesis that productivity convergence is more likely in sectors with greater scope for market integration, because of the effects of competition and knowledge flows. The convergence in labor productivity within manufacturing and mining has been sufficient to lead to convergence in aggregate labor productivity across departments. But because services and agriculture continue to employ the majority of workers in Peru, aggregate convergence is slower than that within manufacturing. The paper also finds that poverty rates are not converging across departments. The limited impact of labor productivity convergence on poverty could be tied to the facts that not all sectors are experiencing productivity convergence, poorer people are employed in sectors where convergence has been slower (such as agriculture), and there is very little labor reallocation toward converging sectors (such as manufacturing).
Bayesian Impact Evaluation with Informative Priors: An Application to a Colombian Management and Export Improvement Program(World Bank, Washington, DC, 2023-01) Iacovone, Leonardo ; McKenzie, David ; Meager, RachaelPolicymakers often test expensive new programs on relatively small samples. Formally incorporating informative Bayesian priors into impact evaluation offers the promise to learn more from these experiments. A Colombian government program which aimed to increase exporting was trialed experimentally on 200 firms with this goal in mind. Priors were elicited from academics, policymakers, and firms. Contrary to these priors, frequentist estimation can not reject 0 effects in 2019, and finds some negative impacts in 2020. For binary outcomes like whether firms export, frequentist estimates are relatively precise, and Bayesian credible posterior intervals update to overlap almost completely with standard confidence intervals. For outcomes like increasing export variety, where the priors align with the data, the value of these priors is seen in posterior intervals that are considerably narrower than frequentist confidence intervals. Finally, for noisy outcomes like export value, posterior intervals show almost no updating from the priors, highlighting how uninformative the data are about such outcomes.
Publication(World Bank, Washington, DC, 2020-10) Apedo-Amah, Marie Christine ; Avdiu, Besart ; Cirera, Xavier ; Cruz, Marcio ; Davies, Elwyn ; Grover, Arti ; Iacovone, Leonardo ; Kilinc, Umut ; Medvedev, Denis ; Maduko, Franklin Okechukwu ; Poupakis, Stavros ; Torres, Jesica ; Tran, Trang ThuThis paper provides a comprehensive assessment of the short-term impact of the COVID-19 pandemic on businesses worldwide with a focus on developing countries. The results are based on a novel data set collected by the World Bank Group and several partner institutions in 51 countries covering more than 100,000 businesses. The paper provides several stylized facts. First, the COVID-19 shock has been severe and widespread across firms, with persistent negative impact on sales. Second, the employment adjustment has operated mostly along the intensive margin (that is leave of absence and reduction in hours), with a small share of firms laying off workers. Third, smaller firms are disproportionately facing greater financial constraints. Fourth, firms are increasingly relying on digital solutions as a response to the shock. Fifth, there is great uncertainty about the future, especially among firms that have experienced a larger drop in sales, which is associated with job losses. These findings provide a better understanding of the magnitude and distribution of the shock, the main channels affecting businesses, and how firms are adjusting. The paper concludes by discussing some avenues for future research.
Publication(World Bank, Washington, DC, 2021-10) Cirera, Xavier ; Cruz, Marcio ; Grover, Arti ; Iacovone, Leonardo ; Medvedev, Denis ; Pereira-Lopez, Mariana ; Reyes, SantiagoBuilding on prior work that documented the impact of COVID-19 on firms in developing countries using the first wave of Business Pulse Surveys, this paper presents a new set of stylized facts on firm recovery, covering 65,000 observations in 38 countries. This paper suggests that: One, since the outset of the pandemic, some aspects of business performance such as sales show signs of partial recovery. Two, other aspects remain challenging, including persistently high uncertainty and financial fragility. Three, recovery is heterogeneous across firms and more sensitive to firm-level attributes such as size, sector, and initial productivity than to country-level differences in the severity of the initial shock. In particular, larger and more productive firms are recovering faster, with implications for competition policy and allocative efficiency. Four, the decline in jobs has been steeper during the initial shock than the expansion in employment during recovery, raising the risk of a "jobless" recovery pattern. Five, the diffusion of digital technology and product innovation accelerated during the pandemic but did so unevenly, further widening gaps between small and large firms. Six, businesses now have more access to policy support, but poorer countries continue to lag behind and appropriate targeting of firms remains a challenge.
Publication(World Bank, Washington, DC, 2022-12) Reed, Tristan ; Pereira López, Mariana ; Urrutia Arrieta, Ana ; Iacovone, LeonardoForty percent of economic activities in Mexico weighed by sales have been investigated for illegal monopolistic practices since the Federal Competition Commission was established in 1993. By exploiting some unique features of the Mexican investigative system, and using a synthetic control approach, this paper examines the causal impact of antitrust sanctions on industry performance and aggregate outcomes. Sanctions cause sales and wages to increase and profit margins to fall in the sanctioned sectors, thus benefiting consumers and workers. Overall, antitrust enforcement contributes roughly half a percent of per capita gross domestic product growth. Outcomes of investigations that are closed without sanction fail to reject the hypothesis that some harmful conduct is not sanctioned because investigators lack resources to prove it conclusively. An implication is that the Commission could generate greater benefits with additional investigative resources.
Publication(World Bank, Washington, DC, 2013-06) Iacovone, Leonardo ; Mattoo, Aaditya ; Zahler, Andrés ; Mattoo, AadityaStudies on innovation and international trade have traditionally focused on manufacturing because neither was seen as important for services. Moreover, the few existing studies on services focus only on industrial countries, although in many developing countries services are already the largest sector in the economy and an important determinant of overall productivity growth. Using a recent firm-level innovation survey for Chile to compare the manufacturing and "tradable" services sector, this paper reveals some novel patterns. First, although services firms have on average a much lower propensity to export than manufacturing firms, services exports are less dominated by large firms and tend to be more skill intensive than manufacturing exports. Second, services firms appear to be as innovative as -- and in some cases more innovative than -- manufacturing firms, in terms of both inputs and outputs of "technological" innovative activity, although services innovations more often take a "non-technological" form. Third, services exporters (like manufacturing exporters) tend to be significantly more innovative than non-exporters, with a wider gap for innovations close to the global technological frontier. These findings suggest that the growing faith in services as a source of both trade and innovative dynamism may not be misplaced.