What Matters to African What Matters to African Firms?Firms?The Relevance of Perceptions DataThe Relevance of Perceptions Data

Michał Oleksowicz

16.12.2010

OutlineOutline

1. Subjective Survey Data

2. What Matters to African Firms

3. Concerns

4. Conclusions

1. Data1. 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?

1.1 1.1 Macroeconomic dataMacroeconomic dataComparison 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 procedureDefinitions of macroeconomic variablesDifferent periodsDifferent currency

1.2 1.2 Macroeconomic dataMacroeconomic data

1.3 1.3 Survey data Survey data

Source: Improving the Quality of Data and Impact- Evaluation Studies in Developing Countiries, 2010

1.1.44 Problems with subjective Problems with subjective survey survey datadataOrdering 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?”

1.1.55 Problems with subjective Problems with subjective survey survey data (cont)data (cont)Scale presented to people:

„How many hours of TV do you watch per day?”

Little mental effort of respondents(subject pick the first or last available

alternatives in a list)

Social nature of the surveyRespondents avoid looking bad in front

of the interviewer

1.6 1.6 Problems with subjective Problems with subjective survey survey data (cont)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

1.7 1.7 Firm level Firm level characteristicscharacteristicsFirm’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

1.1.88 Implications ImplicationsMeasurement 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

2.1 2.1 What Matters to African What Matters to African FirmsFirms26 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 $)

2.2 2.2 QuestionnaireQuestionnaire

Source: What Mattes to African Firms; The relevance of Perceptions Data 2007

2.3a Results, low income2.3a Results, low income(elemental constraints)(elemental constraints)

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

2.3b Results, lower middle 2.3b Results, lower middle incomeincome (quality of (quality of governance)governance)

Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

2.3c Results, upper middle 2.3c Results, upper middle incomeincome (policy nature (policy nature problems)problems)

Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

3. 3. Correlation between firm Correlation between firm perception and external dataperception and external data

Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

3.1 Firm level 3.1 Firm level characteristics characteristics Do the responses at firm level

relate to more „objective” measures of business climate

Probit regression:

3.2 3.2 Firm level Firm level characterisicscharacterisicsResults:

◦ 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

3.3 3.3 Camels and Hippos ?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?

3.4 3.4 Camels and Hippos ? Camels and Hippos ? (cont)(cont)

Source: What Mattes to African Firms; The relevance of Perceptions Data, 2007

4. 4. ConclusionsConclusionsPerception data is usefullFirms 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 recognizedFirm level characteristics affect firms views

on the constraintsThere is a correlations between subjective

and objective measures

BibliographyBibliography 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.