Market Access and Economic Development

Market Access and Economic Development

A huge challenge for research and policy efforts to accelerate economic development is that firms in poor countries grow surprisingly slowly, making job creation in the “Global South” difficult to achieve. We don’t know why: the existing literature has focused on internal (or “supply-side”) determinants of productivity that firms in poor countries are hypothesized to lack, but these appear to have modest explanatory power. A notable alternative explanation is that many latently productive firms are constrained by forces external to the firm. Recent studies indeed establish that access to input and output markets appear to be important for growth. However, the existing evidence focuses on access constraints arising from poor infrastructure and countries’ trade barriers: firms’ and individuals’ de facto ability to acquire production inputs and sell output is likely influenced by a much broader set of economic, political, and social factors. Similarly, the consequences of market access may extend to “subsequent” economic development outcomes like job creation and changes in inequality. ACCESS puts the causes and consequences of market access in poor countries at the center of inquiry for the first time. The research program is organized around the various stages of the production process: firms’ access to labor markets; firms’ access to suppliers and buyers in intermediate markets; and firms’ access to final product demand. In its last part, ACCESS returns to the origin of the production process to investigate how barriers to the most fundamental form of market access—individuals’ ability to own and operate firms—affects local economies. Novel forms of detailed microeconomic data from a wide range of developing countries—especially Colombia, Liberia, the Philippines, and Uganda; new economic theory; and varied empirical methods are used to begin to uncover the many overlooked barriers to and consequences of market access.