What Matters to African Firms? Perceptions Data Relevance

1. What Matters to African Firms?The Relevance of Perceptions Data MichałOleksowicz 16.12.2010

2. Outline • Subjective Survey Data • What Matters to African Firms • Concerns • Conclusions

3. 1. Data The importance of reliable data Macroeconomic data Subjective survey data • Easy available but rarely used by economists • What are the problems with this data?

4. 1.1 Macroeconomic data Comparison of three sets of macroeconomic indexes: (export, import), (external, internal debt), (private, public savings) IMF, Central Bank of Nigeria, World Bank, UN Differences: • Data collection procedure • Definitions of macroeconomic variables • Different periods • Different currency

5. 1.2 Macroeconomic data

6. 1.3 Survey data Source: Improving the Quality of Data and Impact- Evaluation Studies in Developing Countiries, 2010

7. 1.4 Problems with subjective survey data • Ordering of questions (people attempt to provide consistent answers): „How happy are you with life in general?” „How often do you normally go out on a date?” • Question wording: „Do you think that United States should forbid public speeches against democracy?” „Do you think that United States should allow public speeches against democracy?”

8. 1.5 Problems with subjective survey data (cont) • Scale presented to people: „How many hours of TV do youwatch per day?” • Little mental effort of respondents (subject pick the first or last available alternatives in a list) • Social nature of the survey Respondents avoid looking bad in front of the interviewer

9. 1.6 Problems with subjective survey data (cont) • Non Attitudes, Wrong Attitudes • Attitudes are unstable over time • Respondents believe that they should have an opinion • Respondents may not understand why they did what they did

10. 1.7 Firm level characteristics • Firm’s benchmarks may differ by country • Firm’s may not recognize the origin of their problem • Constraints bind firms simultaneously • Firm level characteristics may affect views on the severity of constraints

11. 1.8 Implications • Measurement error • Mean of error term may not be zero • Error term may be correlated with observable and unobservable characteristics of individual • Subjective measures may be used as explanatory variables • Subjective measures can not be used as dependent variables

12. 2.1 What Matters to African Firms • 26 countries • Three income groups: • Low income (per capita income < 400 $) • Lower middle income (400 $ < per capita income < 2000 $) • Upper middle income (per capita income> 2000 $)

13. 2.2 Questionnaire Source: What Mattes to African Firms; The relevance of Perceptions Data 2007

14. 2.3a Results, low income (elemental constraints) Source: What Mattes to African Firms; The relevance of Perceptions Data. 2007

15. 2.3b Results, lower middle income(quality of governance) Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

16. 2.3c Results, upper middle income(policy nature problems) Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

17. 3. Correlation between firm perception and external data Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

18. 3.1 Firm level characteristics • Do the responses at firm level relate to more „objective” measures of business climate • Probit regression:

19. 3.2 Firm level characterisics Results: • firm size does not drive the severity of concern about electricity • Corruption is a more concern to larger firms • Tax admission is a more serious problem to exporting firms • Domestic firms complain more about access to finance

20. 3.3 Camels and Hippos ? • Interviewing camels and hippos on a desert. What the real problem is? • Similarly firms in countries with low financial depth should be self- selected and not see financial constraint as a severe. In other words, do the ability to adjust weakens the perception of constraint?

21. 3.4 Camels and Hippos ? (cont) Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

22. 4. Conclusions • Perception data is usefull • Firms are bounded by a group of constraints subject to different income levels • Elemental constraints (electricity, access to finance, macro instability, access to land) • Governance constraints (tax rates, tax administration, corruption, crime) • Policy constraints (skilled workers, labor regulations) • Adapting to a problem does not mean that the problem is no longer recognized • Firm level characteristics affect firms views on the constraints • There is a correlations between subjective and objective measures

23. Bibliography • Ariyo A.. 1996. Quality of macroeconomic data on Afica: Nigeria as a case study • Bertrand M.,Mullainathan S.. 2001. Do Poeple Mean What They Say? Implications for Subjective Survey Data. • Gelb A., Ramachandran V., Shah M., Turner G.. 2007.What Mattes to African Firms; The relevance of Perceptions Data.