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is prepared by Sergiy Zorya (ARD), Varun Kshirsagar (AFTAR), Madhur Gautam (SAARD), Willy Odwongo (AFTAR), Jos Verbeek (AFTP2), and Rachel Sebudde (AFTP2). It draws on various background studies recently undertaken for the Uganda Inclusive Growth Project. 2 Inclusive growth is defined as economic growth .

This paper identifies the business constraints that are most binding for firm performance. Using panel methods on novel quarterly Ugandan business climate data, we exploit perceived changes in business climate constraints to account for changes in firm performance. Not all identified constraints are binding for firm performance. Macroeconomic instability, demand stability, access to finance, corruption/bribery, and weather variability are found to be binding constraints. Firms' expectations about future performance outcomes are associated with current perceptions about these constraints, alleviating endogeneity concerns to some extent. While taxation constraints are usually highly ranked, we do not find evidence linking them to firm performance.

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