relationships between infrastructure and economic performance at a more disaggregated level. Additionally, by going down to the firm level, we avoid the endogeneity problems of the macro level variables. Nevertheless, micro level data have specific endogeneity problems, and several variables cannot be considered to be exogenously determined; for instance, public investment decisions are likely to be affected by expected returns on investment, and firms faced with different quality and availability of infrastructure services would choose different technologies. The solutions proposed in this methodology allow us to obtain a robust assessment of the impact of infrastructure quality on TFP.

# **3. Country-level data and their treatment in the study**

Produced by the World Bank, ICSs of private enterprises explore the difficulties that firms located in developing countries encounter in starting and running businesses. More precisely, the surveys capture firms’ experiences in a range of areas related to economic performance: financing, governance, corruption, crime, regulation, tax policy, labor relations, conflict resolution, infrastructure, supplies and marketing, quality, technology, training, and so on. For that purpose, we classify IC factors in five categories to evaluate the impact of each group on economic performance. In the first group— infrastructure—we include all related variables such as customs clearance, power and water supply, telecommunications (including phone connection and information technology, IT), and transportation. In the second group—red tape, corruption, and crime—we include IC factors relating to tax rates, conflict resolution, crime, bureaucracy, informalities, corruption, and regulations. The next group comprises financial and corporate governance and includes factors related to management, investments, informalities in sales and purchases, access to finance, and accountability (or auditing). The last group of IC variables includes quality, innovation, and labor skills, as well as quality certifications, technology usage, product and process innovation, research and development (R&D), quality of labor, training, and managers’ experience and education. The last group—other C variables—are not properly a group of IC factors, but a group of other firms’ control characteristics. We classify in this group all the factors that may have an important impact on economic performance but are not considered IC factors: exports and imports, age, FDI, number of competitors, firm size, and so on. Table A.2 (see the Appendix) includes the whole list of IC and C variables, as well as a description of how each is measured. Likewise, not all surveys provide the same information on ICSs, although there is a common group of variables in each group that is available for all the countries; although the regressions among them are slightly heterogeneous, we can use this common group as a benchmark for comparison purposes.

The ICSs provide information on TPF variables, output (sales), employment, intermediate materials, capital stock, and labor costs. Table A.1 includes information on these variables and indications of how they were measured. The ICSs do not provide information on prices at the firm level, so the production function (PF) variables were deflated by using the World Bank’s countryspecific consumer price index (CPI), base 2000. The information on the net book value of the capital stock (NBVC) is not available for Algeria, Kenya, Mali, Senegal, and Uganda; in these cases the 15