JOBS WORKING PAPER Issue No. 57 Empirical Evidence on Firm Growth and Jobs in Developing Countries Johanne Buba, Alvaro Gonzalez and Anam Rizvi EMPIRICAL EVIDENCE ON FIRM GROWTH AND JOBS IN DEVELOPING COUNTRIES Johanne Buba, Alvaro Gonzalez, Anam Rizvi1 © 2020 International Bank for Reconstruction and Development / The World Bank. 1818 H Street NW, Washington, DC 20433, USA. Telephone: 202-473-1000; Internet: www.worldbank.org. Some rights reserved This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. 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Contents EMPIRICAL EVIDENCE.................................................................................................................................... 1 ON FIRM GROWTH AND JOBS IN DEVELOPING COUNTRIES.........................................................................1 1. INTRODUCTION ..................................................................................................................................... 4 2. FINANCE ................................................................................................................................................ 5 a. Grants ................................................................................................................................................ 5 b. Microfinance ................................................................................................................................... 11 c. Private investors ............................................................................................................................. 13 3. JOBS..................................................................................................................................................... 15 a. Those frictions to hiring .................................................................................................................. 15 c. Those frictions to productivity and growth .................................................................................... 18 4. KNOW-HOW AND TECHNOLOGY ........................................................................................................ 20 a. Know-How ....................................................................................................................................... 20 b. Technology ...................................................................................................................................... 31 5. MARKET-LED SHOCKS ......................................................................................................................... 35 6. MORE RESEARCH NEEDED .................................................................................................................. 37 ................................................................................................................................................................ 38 Bibliography ................................................................................................................................................ 39 Annex 1 : Firm-level interventions with RCT............................................................................................... 45 ANNEX 2: KEY RESSOUCES TO KNOW MORE ON FIRMS ............................................................................. 59 ANNEX 3: COST PER INTERVENTIONS AND JOBS ........................................................................................ 63 Table 1: Indicators related to access to finance a. Grants b. Microfinance c. Private investors Figure 1: Available External Financing Options Source: Based on IFC (2010), Scaling-Up SME Access to Financial Services in the Developing World, Financial Inclusion Experts Group, SME Finance Sub-Group. a. Frictions to hiring c. Frictions to productivity and growth a. Know-How b. Technology ́ : Table 2: Experiments addressing the constraint Access to Finance and characteristics of firms Table 3: Experiments addressing the constraint Access to Finance and Impacts Table 4: Experiments addressing the constraint Labor and characteristics of firms Table 5: Experiments addressing the constraint Labor and Impacts Table 6: Experiments addressing the constraint Lack of Know-How and characteristics of firms Table 7: Experiments addressing the constraint Lack of Know-How and Impacts An Enterprise Survey is a firm-level survey of a representative sample of an economy’s private sector. The surveys cover a broad range of business environment topics including access to finance, corruption, infrastructure, crime, competition, and performance measures. Since 2005-06, nearly all data collection efforts have been centralized within the Enterprise Analysis Unit, where a Global Methodology was developed and applied ever since. To date, over 164,000 interviews in 144 countries have taken place under the Global Methodology. More detailed information about the Enterprise Surveys can be found on the . The Enterprise Surveys Unit uses two instruments: the Manufacturing Questionnaire and the Services Questionnaire. Although many questions overlap, some are only applicable to one type of business. For example, retail firms are not asked about production and nonproduction workers. The standard Enterprise Survey topics include firm characteristics, gender participation, access to finance, annual sales, costs of inputs/labor, workforce composition, bribery, licensing, infrastructure, trade, crime, competition, capacity utilization, land and permits, taxation, informality, business-government relations, innovation and technology, and performance measures. Over 90 percent of the questions objectively ascertain characteristics of a country’s business environment. The remaining questions assess the survey respondents’ opinions on what are the obstacles to firm growth and performance. The mode of data collection is face-to-face interviews. The WMS methodology is described in detail in Bloom and Van Reenen’s 2007 management paper, Measuring and Explaining Management Practices Across Firms and Countries. In summary, the methodology allows interviewers to: ▪ Obtain and conduct interviews with senior managers by 1) monitoring interviewer’s performance in contacting firms and scheduling interviews, 2) presenting the study as a “piece of work” and the interview as a confidential conversation about management experiences without any mentioning of the organization’s financial performance, 3) sending informational letters as well as copies of country endorsements letters if necessary, and 4) starting with non-controversial questions of management practices within the organization. ▪ Ensure the collection of accurate responses through a blind technique by 1) conducting a telephone survey without informing the managers that their answers will be evaluated against a scoring grid and thus, gathering information about actual management practices (as opposed to manager’s aspirations, perceptions and interviewer’s impressions), 2) asking open-ended questions until an accurate assessment of the actual management practices can be made, 3) assuring that each interviewer conducts a minimum amount of interviews in order to correct any inconsistent interpretation of responses, 4) double- scoring, i.e, having another interviewer silently listening and scoring the responses provided during the interview to be discussed with the primary interviewer, and 5) conducting a second interview with another manager in the same organization for a set number of organizations. ▪ Evaluate and score management practices by defining the concept of “good” and “bad” management practices and codifying them from 1 (worst practice) to 5 (best practice) across key management practices used by organizations across different sectors. 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Market study to understand job growth potential in SMEs in Nepal (2020) Click here for full Jobs Paper Series Address: 1776 G St, NW, Washington, DC 20006 Website: http://www.worldbank.org/en/topic/jobsanddevelopment Twitter: @WBG_Jobs Blog: https://blogs.worldbank.org/jobs/