We introduce a novel approach to modeling the impact of institutional quality on firm performance. Our methodology enables us to estimate the marginal effect of institutional quality on TFP, factor inputs and output of each firm, which gives us within-country distributions of these effects and...

Using firm-level data from nine developing countries we demonstrate that (a) certain institutions like restrictive labour market regulations that are considered to be bad for economic growth might be beneficial for production efficiency, whereas (b) good business environment which is considered...