# **Data source and indicators**

This paper uses the Interim Enterprise Survey of South Asian countries by The World Bank (INTERIM ES). The survey was conducted in 2009 and 2010. The Enterprise Surveys of the World Bank generate establishment-level quantitative information. The stratification of the survey considers representativeness across firm size classes (large firms were oversampled), sector (primary, secondary and tertiary), and regions<sup>4</sup> . The survey is not representative at the industry level. The sample covers 744 observations in Afghanistan (2010), 500 in Bangladesh (2010), 250 in Bhutan (2009), 482 in India (2010), 368 in Nepal (2009), 440 in Pakistan (2010), 484 in Sri Lanka (2010).

The data set contains a rich set of variables. These include information on the survey country and region, industry (2-digit ISIC Rev. 3.1; clustered into 15 industry groups) and sector, information on whether a company invested into physical assets, firm age, and the size of the location. In addition, there is information on ownership structures, export activities, financial structures, and the perception of obstacles such as electricity, access to finance or corruption. Furthermore, the questionnaire of the Interim Enterprise Survey considers employment data of the survey year, as well as recall data from three years prior to the survey year.

The survey instrument that was implemented has two drawbacks. First, it does not contain enough information to conduct a productivity analysis at the firm level. Second, the data are cross sectional, i.e. it is not possible to track firms over time, or create a panel variable.

There are various indicators of employment growth, whose characteristics typically affect results and make the choice of indicators key to any analysis. Growth can be defined in terms of employment, sales and net assets. Each of these indicators is geared to a different aspect of firm growth. The choice of the growth indicator – in terms of employees, sales and net assets – can lead to quite different results (Heshmati 2001), since expansion processes may be rather different.<sup>5</sup> This paper focuses on employment, and uses two indicators which are commonly found in firm growth literature. First, a relative growth indicator puts the extent of employment growth in relation to the firm size in the base year. Second, a synthetic indicator suggested by Birch (1981, 1987) controls for bias towards firm size.

Since the choice of the indicator affects the analysis of the relationship between size and growth, and qualitatively does not change the results, we will for the country and industry analysis focus on relative growth rates. In the sections on size and growth, and the effect of location and growth, we will also consider the Birch indicator.

Let Ei,t denote the number of permanent, full time individuals working for the interviewed establishment i in the survey year t, and Ei,t-3 the number of permanent, full time individuals working for the establishment i three years ago. Formally, the basic growth indicators are: 4 It is unclear if Afghanistan is representative, since a total population of firms (e.g. census data) is unavailable. Pakistan is not representative, because enumerators could not enter certain regions due to security concerns. In addition, in India only Andhra Pradesh, Delhi, Gujarat Maharashtra and Tamil Nadu were covered.

5 Among the three indicators, employment generation seems to be best suited for cross-country comparisons, as employment data is less influenced by other aspects, such as volatility or different legislation leading to different reporting behavior. Moreover, employment generation is of strong political interest.

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