Using firm-level data from nine developing countries, we demonstrate that certain institutions, like restrictive labour market regulations, that are considered bad for economic growth might be beneficial for production efficiency, whereas good business environment, which is considered beneficial for economic growth, might have an adverse impact on production efficiency. We argue that our results suggest that there might be significant difference in the macro- and micro-impacts of institutional quality, such that the classification of institutions into 'good' and 'bad might be premature.
Bibliographical noteThis is a pre-copyedited, author-produced PDF of an article accepted for publication in Cambridge journal of economics] following peer review. The version of record Bhaumik, S. K., & Dimova, R. (2014). Good and bad institutions – is the debate over? Cross-country firm-level evidence from the textile industry. Cambridge journal of economics, 38(1), 109-126 is available online at: http://cje.oxfordjournals.org/content/38/1/109
- institutional quality
- production efficiency
- stochastic frontier model