Publication: Investment Climate and International Integration
Date
2004-06
ISSN
Published
2004-06
Author(s)
Abstract
Drawing on recently completed firm-level
surveys in Bangladesh, Brazil, China, Honduras, India,
Nicaragua, Pakistan, and Peru, this paper investigates the
relationship between investment climate and international
integration. These standardized surveys of large, random
samples of firms in common sectors reveal how firms
experience bottlenecks and delays in hard infrastructure
such as power and telecom as well as in soft infrastructure
such as customs administration. The authors focus primarily
on measures of the time or monetary cost of different
bottlenecks (e.g., days to clear goods through customs, days
to get a telephone line, sales lost to power outages). For
many of these costs, the obstacles are lower in China than
in the South Asian or Latin American countries. There is
also systematic variation across cities within countries.
The authors estimate a probit function for the probability
that a randomly chosen firm is foreign-invested and a
separate probit for the probability that a randomly chosen
firm is an exporter. These measures of international
integration are higher where investment climate is better.
For locations to take advantage of opportunities in the
international market, they need good infrastructure and a
sound regulatory environment. The interaction of openness
and sound investment climate creates a good environment for
investment and production. This paper helps explain why
China has been so successful over the past decade, both in
terms of integration and of rapid growth, while other
countries have had varied success.
Link to Data Set
Citation
“Dollar, David; Hallward-Driemeier, Mary; Mengistae, Taye. 2004. Investment Climate and International Integration. Policy Research Working Paper;No.3323. © World Bank, Washington, D.C.. http://hdl.handle.net/10986/14008 License: CC BY 3.0 IGO.”
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