Raghuram G. Rajan

Luigi Zingales

Krishna B. Kumar

Abstract: Motivated by theories of the firm, which we classify as technological' or organizational, ' we analyze the determinants of firm size across industries and across countries in a sample of 15 European countries. We find that, on average, firms facing larger markets are larger. At the industry level, we find firms in the utility sector are large, perhaps because they enjoy a natural, or officially sanctioned, monopoly. Capital intensive industries, high wage industries, and industries that do a lot of R & D have larger firms, as do industries that require little external financing. At the country level, the most salient findings are that countries with efficient judicial systems have larger firms, and, correcting for institutional development, there is little evidence that richer countries have larger firms. Interestingly, institutional development, such as greater judicial efficiency, seems to be correlated with lower dispersion in firm size within an industry. The effects of interactions (between an industry's characteristics and a country's environment) on size are perhaps the most novel results in the paper, and are best able to discriminate between theories. As the judicial system improves, the difference in size between firms in capital intensive industries and firms in industries that use little physical capital diminishes, a finding consistent with size of firms in industries dependent on external finance is larger in countries with better financial markets, suggesting that financial constraints limit average firm size.

What Determines Firm Size?

Informality is ubiquitous in the labor markets of developing countries, and requiring that firms formally register, pay taxes, and provide employee benefits stipulated in labor regulations to reduce such informality is challenging. However, a matched survey on employer- employee preferences suggests that mutually beneficial job benefits exist, and that encouraging their adoption might be feasible. Carefully designed discrete choice experiments on combinations of benefits related to compensation, leave and termination policies, working conditions, and accident insurance, along with incentives for employers, reveal the relative values that workers and employers attach to each benefit. The results show that workers tend to value advance notice for job termination and accident insurance, and that employers are not averse to providing these benefits. In contrast, workers find long working hours without overtime compensation to be highly undesirable, whereas many employers are generally unwilling to provide shorter hours or overtime pay unless they face the threat of fines or are offered substantial incentives for doing so. Our findings therefore suggest that encouraging the provision of termination notice and accident insurance may be relatively easy, but that increasing compliance with legal limits on working hours and overtime compensation is likely to require increased enforcement or substantial incentives.

Evidence from a Matched Survey on the Bangladesh Informal Sector /Krishna B. Kumar, Minhaj Mahmud, Shanthi Nataraj, Yoonyoung Cho

Employer and Employee Preferences for Worker Benefits

Shelly Culbertson

Louay Constant

Faith Unlu

Shanthi Nataraj

Kathryn E. Bouskill

Joy S. Moini

Katherine Costello

Gursel Rafig oglu Aliyev

Fadia Afashe

This report examines the labor markets in Turkey, Jordan, and Lebanon for Syrian migrants fleeing the civil war. Each country has its specific challenges, and recommendations are tailored to each to improve the socioeconomic environment for all.

Mutually Beneficial Opportunities for Syrians and Host Countries in Middle Eastern Labor Markets

Opportunities for All

Krishna B. Kumar

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