_Egypt_ (2004, 2006)<sup>16</sup> . _Syria_ (2003) and _Oman_ (2003), which were initially part of the sample, had to be removed because of a very low rate of answer to the questionnaire. By broadening the initial sample to a large number of countries from different regions, we have intended to compare MENA performances to the ones of emerging economies which appears as major competitors in the world market: _China_ and _India_ in particular.

To estimate firm-level productivity, we initially considered a population of almost 20,000 firms, coming from 13 manufacturing industries. This initial sample had to be reduced due to various limitations. Calculation of productive performances requires information on at least 5 variables: (1) production, (2) intermediate consumption, (3) labor, (4) wages, and (5) capital stock. For several enterprises, part of this information appeared difficult to get. For others, answers showed flagrant inconsistencies. Enterprises were eliminated in particular when the calculation of productive performances revealed to be questionable or not in line with the income per capita in the country<sup>17</sup> . Some industries as well had to be merged, due to insufficient observations. In fine, 12 414 enterprises (3073 for the MENA region) regrouped in eight industries were retained when estimating the production frontiers (see _Annex 2_ )<sup>18</sup> .

As for inputs and output, investment climate variables are subject to measuring errors. In the surveys, some firms did not report the full range of investment climate measures. Other firms reported numbers that were not credible. This is also due to the fact that most of investment climate factors are qualitative variables of perception, thus allowing answers to vary depending on the firms, the regions or the countries. Our choice has been to keep as many firms as possible, providing sufficient information on a wide range of investment climate variables. Once outliers and incomplete observations were removed, 5002 observations were left, among which 1483 for the MENA region, what represent 34% of MENA initial population and 30% of the total number of enterprises with _IC_ variables (see _Annex 2_ ).<sup>19</sup> .

Another question relates to the endogeneity of the _IC_ variables, due to the qualitative nature of investment climate factors. This is particularly true for perception variables (such as obstacles to operation) for which firms are asked to position their answer on a given scale<sup>20</sup> . The perception of the scale might be different across firms, industries, regions and countries. Besides, when answering the questions on their investment climate, firms may be influenced by the perception they have of their own productivity and may attribute their inefficiencies to external factors. High-performing firms, as well, may be proactive in reducing their investment climate constraints, for example by working with the authorities to limit inspections or secure more reliable power supply. They also can choose a location with better infrastructure and production conditions, what relates to the endogeneity of implantation.

In the empirical part, we assume these endogeneneities and use appropriate estimation techniques to evaluate the impact of the investment climate on the firms’ productive performances. We measure in particular investment climate variables as city or region-sector averages of firm-level observations<sup>21</sup> . This also helps to mitigate the effects of missing observations for some firms. Actually, if we take each investment climate indicator at the firm level, we end up with a smaller sample of observations in which all indicators are available. Furthermore, to address the issue of endogeneity of firms’ implantation, we restrict the sample to the enterprises that are less likely to choose their location. We define a category of domestically owned firms employing less than 150 workers by excluding from the sample the foreign, as well as large domestically owned firms, Exchange rate constitutes another source of uncertainty which may lead to over or under evaluate firm’s productive performances. This rate is used to convert production and production factors into US dollars. Several exchange rates can be chosen to calculate and 7