# **Table 1.  Variable definitions and Sources**

|**Variables**|**Definition and source**|
|---|---|
|Lgrowth|One-year employment growth rate. First calculate 3-year growth rate as the change in permanent<br>employees in 3 years divided by initial number of permanent employees. Then convert it to one-year<br>growth rate (g1). The Lgrowth = 2*g1/(2+g1), which is the Haltiwanger measure of labor growth,<br>bound by -2 and 2 to avoid the typical extreme outlier problem associated with the un-transformed g1.|
|lnLP|The logarithm of labor productivity (LP). LP is measured as sales over the number of permanent<br>employees. Winsorized at tail 2 percent to avoid the outlier issue.|
|LPgrowth|The annualized (Haltiwanger) LP growth rate. The procedure is the same with Lgrowth except that<br>the basic building block is LP instead of L.|
||Total factor productivity, estimated as the residual from industry-specific production function with<br>|
|TFP|log value added as the dependent variable and log capital and log labor as the independent variables.<br>K is replacement cost of land and machine. L is the number of permanent employees plus 0.5 times<br>the number of temporary employees.|
|Foreign|The share of foreign ownership of the firm.|
|OwnBiggest<br>|The ownership share of the largest owner.|
|L020-100<br>(100+)|The firm’s number of employees three years ago was 20-100 (more than 100).|
|Age 6-10 (10+)|The firm’s age is between 6 and 10 years (or 10 or more years).<br>The firm is located in a city of a million residents or the capital. This variable has 20.5% of missing,<br>and to avoid loss of sample, we impute the missing with we impute the missing with World Bank|
|In Big City|<br>income group dummies, regional dummies (LAC, MNA, SAR, ECA, EAP, Africa), service industry<br>dummy, size dummies (10-20 employees, 20-60 employees, 60+ employees), age dummies (firm age<br>between 6 and 10 years old; 10 years plus).|
|Small|The firm is a small enterprises, that is, employing fewer than 50 employees.|
|Young|The firm’s age is younger than 10 years.|
|Rich|The firm is located in a country that is below the medium GDP per capita in the sample.|
|Exporter|The firm is an exporter.|
|lnPopt-1|Log(once-lagged population level)|
|lnGDPPCt-1|Log(once-lagged GDP per capita in real US dollars).|
|lnPopDent-1|Log(once-lagged population density)|
||City-industry-level average of the firm’s answer on whether “XX’ constitutes an obstacle, ranking|
|XX Obstaclec|<br>from 0 to 4 (with 4 being more severe obstracles). XX is one of the following: corruption, skilled<br>labor availability, labor regulation, tax rate burdens, land acquisition. The subscript c for these<br>ibl idit tht it i bd itidtll th th fi’|
||varaes ncae a s ase on cy-nusry-eve average raer an a rms answer.|
|Overdraft<br>Facilityc|City share of firms with overdraft facility. Based on WBES calculation.|
|Trade Creditc|City average of the proportion of total annual sales of goods and services that are paid for after<br>delivery. Based on WBES calculation.|
|Inf<br>Competititonc|City share of firms who say that they directly compete with informal firms. It is a measure of the<br>importance of the informal sector and its competition with the formal sector. Based on WBES<br>calculation.|
|Outagec|City-industry share of firms that experienced a power outage in the survey year. Based on WBES.|
|Webc|City-industry share of firms that answer that they use websites to conduct business.|
|Security Costc|City-industry average of the share of a firm’s sales paid for security. Based on WBES.|
|Capacity<br>Agglomerationc|The share of firms whose number of employees exceeding 50, as a proxy of capacity agglomeration.<br>Computed based on sample firms.|

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