Identifying Binding Constraints to Growth: Does Firm Size Matter?

As emphasized by Hausmann, Rodrik and Velasco, the policy challenge of boosting growthrequires prioritization and identifying what are the most binding constraints. This paperdraws on firm-level data from the World Bank Enterprise Survey, which suggests that theobstacles for the functioning of firms is related to firm size. Recognizing the potentialendogeneity and simultaneity between firms' constraints and firm size, we implement anOrdered-Probit model with a potential categorical endogenous regressor to estimate, for thecase of Bolivia, the conditional probability of facing obstacles given the firm size category,while controlling for other factors. The results confirm the importance of allowing for theroles of firm size in identifying constraints and suggest priorities for policies to removeconstraints to economic performance.