Iacovone, Leonardo

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Iacovone, Leonardo

Global Practice on Trade and Competitiveness, The World Bank

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Global Practice on Trade and Competitiveness, The World Bank

Last updated: October 1, 2024

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Unmasking the Impact of COVID-19 on Businesses: Firm Level Evidence from Across the World
(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 Thu
This 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.
The Impact of the COVID-19 Pandemic on Women-Led Businesses
(World Bank, Washington, DC, 2021-10) Torres, Jesica; Maduko, Franklin; Gaddis, Isis; Iacovone, Leonardo; Beegle, Kathleen
The COVID-19 pandemic has struck businesses across the globe with unprecedented impacts. The world economy has been hit hard and firms have experienced a myriad of challenges, but these challenges have been heterogeneous across firms. This paper examines one important dimension of this heterogeneity: the differential effect of the pandemic on women-led and men-led businesses. The paper exploits a unique sample of close to 40,000 mainly formal businesses from 49 countries covering the months between April and September 2020. The findings show that women-led micro-businesses, women-led businesses in the hospitality industry, and women-led businesses in countries more severely affected by the COVID-19 shock were disproportionately hit compared with businesses led by men. At the same time, women-led micro-firms were markedly more likely to report increasing the use of digital platforms, but less likely to invest in software, equipment, or digital solutions. Finally, the findings also show that women-led businesses were less likely to have received some form of public support although they have been hit harder in some domains. In a crisis of the magnitude of the COVID-19 pandemic, evidence tracing the impact of the shock in a timely fashion is desperately needed to help inform the design of policy interventions. This real-time glimpse into women-led businesses fills this need for robust and policy-relevant evidence, and due to the large country coverage of the data, it is possible to identify patterns that extend beyond any one country, region, or sector, but at the cost of some granularity for testing more complex economic theories.
Personal Initiative Training Leads to Remarkable Growth of Women-Owned Small Businesses in Togo
(World Bank, Washington, DC, 2018-01) Campos, Francisco; Frese, Michael; Goldstein, Markus; Iacovone, Leonardo; Johnson, Hillary; McKenzie, David; Mensmann, Mona
Standard business training programs aim to boost the incomes of the millions of self-employed business owners in developing countries, by teaching accounting, marketing and other basic business skills. However, research shows limited impacts of this traditional business training approach. Through an experiment in Togo, we introduced the personal initiative training program, a new and effective psychology-based entrepreneurship training that outperforms traditional business training. The personal initiative training increased firm profits in Togo by 30 percent relative to a control group, compared to no significant impacts from a traditional business training. Personal initiative training led to more than just a boost in profits for micro entrepreneurs. After the training business owners were more innovative, introduced new products, borrowed more and made larger investments. The personal initiative training was particularly effective for female entrepreneurs, for whom traditional training has often been in effective. Women who received personal initiative training saw their profits increase by 40 percent, compared to 5 percent for traditional business. This study’s findings make a strong case for the role of psychology in better influencing how small business training programs are taught in West Africa and beyond. It shows the importance of developing an entrepreneurial mindset in addition to learning the business practices of successful entrepreneurs. Based on these promising results, the personal initiative training is being implemented in programs in Mozambique, Mauritania, Ethiopia, Jamaica, and Mexico.
Productivity Growth in Mexico: Understanding Main Dynamics and Key Drivers
(World Bank, Washington, DC, 2022) Munoz Moreno, Rafael; Iacovone, Leonardo; Olaberria, Eduardo; Pereira Lopez, Mariana De La Paz
The report undertakes, for the first time, a comprehensive firm-level analysis of the entire Mexican economy over 25 years, relying on the last six rounds of the Economic Census, which were conducted between 1994 and 2019 and surveyed more than 20 million businesses. It finds that Mexico’s disappointing aggregate productivity masks large differences in productivity levels and growth across locations, sectors, and firms. A geographic productivity divide runs between the North-Center and South of Mexico, but large differences also persist between municipalities within regions. Fast-growing municipalities that have caught up to the Mexican productivity frontier, including in the South, while others have failed to grow at all. There is also a divide between modern firms, with access to finance and strong management, integrated into global value chains (GVCs), and more traditional firms characterized by limited access to finance and weak capabilities, unable to benefit from Mexico’s regional and global integration. The report shows that Mexico’s aggregate productivity is weakened by structural factors at industry and firm level — access to finance, lack of incentives to invest in technology, managerial capacities, and the business environment — that impede productive firms’ access to resources. The rest of this summary gives a synopsis of the report’s main findings and recommendations.
Women Entrepreneurs in Mexico: Breaking Sectoral Segmentation and Increasing Profits
(World Bank, Washington, DC, 2020-10) Cucagna, Emilia; Iacovone, Leonardo; Rubiano-Matulevich, Eliana
Across the globe, women often face lower income opportunities relative to men. Many of the dierences in economic outcomes can be explained by the sectors in which women tend to operate. Structural factors also contribute to the gender gap in economic opportunities. Mexican women who cross over to operate businesses in male-dominated sectors perform better than noncrossovers in a range of indicators, including sales and profits. This brief focuses on the women entrepreneurs in Mexico as of October 2020.
Long-Term and Lasting Impacts of Personal Initiative Training on Entrepreneurial Success
(Washington, DC: World Bank, 2024-10-01) Campos, Francisco; Frese, Michael; Iacovone, Leonardo; Johnson, Hillary C.; McKenzie, David; Mensmann, Mona
A randomized experiment in Togo found that personal initiative training for small businesses resulted in large and significant impacts for both men and women after two years (Campos et al, 2017). This paper revisits these entrepreneurs after seven years, and finds long-lasting average impacts of personal initiative training of $91 higher profits per month, which is larger than the 2-year impacts. However, these long-term impacts are very different for men and women: the impact for men grows over time as they accumulate more capital and increase self-efficacy, whereas the impact for women dissipates, and capital build-up is much more limited.
Firm Recovery during COVID-19: Six Stylized Facts
(World Bank, Washington, DC, 2021-10) Cirera, Xavier; Cruz, Marcio; Grover, Arti; Iacovone, Leonardo; Medvedev, Denis
Building 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.
Cartels, Antitrust Enforcement, and Industry Performance: Evidence from Mexico
(World Bank, Washington, DC, 2022-12) Reed, Tristan; Pereira López, Mariana; Urrutia Arrieta, Ana; Iacovone, Leonardo
Forty 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.
The DR-CAFTA and the Extensive Margin : A Firm-level Analysis
(2010-06-01) Molina, Ana Cristina; Bussolo, Maurizio; Iacovone, Leonardo
This paper examines the export behavior of Dominican Republic exporters following the implementation of the Dominican Republic-Central America Free Trade Agreement in 2007. Using a firm-level dataset for 2002-2009, the authors investigate the effects of a tariff reduction on the extensive margin. The analysis distinguishes the impact on the entry of new firms, exports of new products, and entry into the Agreement s markets. The paper analyzes whether the agreement prevents incumbent exporters from exiting the market. The results suggest that tariff cuts had a positive although very small effect on the extensive margin. A decline in tariffs also seems to reduce the probability of exit, but the effect is also small. The evidence calls for complementary policies aiming at helping exporters maximize the benefits of the agreement.
ICT Adoption and Wage Inequality: Evidence from Mexican Firms
(World Bank, Washington, DC, 2018-01) Pereira-Lopez, Mariana; Iacovone, Leonardo
This paper uses a panel of firms from the Mexican Economic Censuses and analyzes at the microeconomic level how labor markets adapt to the adoption of information and communication technologies. The paper studies the effects of the adoption of information and communication technologies over the labor structure of the firm and wages. Thus, it assesses whether increasing the use of information and communication technologies leads to an increasing demand for skilled relative to low-skilled labor, and, thus, analyzes its effects on the wage gap between the two groups. The results of this analysis show that there is indeed an effect of the adoption of information and communication technologies over the demand for higher-skilled workers. However, for the manufacturing and services sectors, instead of increasing the wage gap between skilled and unskilled workers, the wage gap decreases. The results for the manufacturing sector appear to be driven by an increasing sophistication of blue-collar workers due to the organizational adjustments derived from the adoption of information and communication technologies.