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To overcome the absence of true firm-level data, we provide evidence that the use of pseudopanels based on aggregated data can correctly identify production function parameters. We construct a pseudo-panel of Colombian manufacturing firms for the years of 2000 to 2009 to study the effects of transportation infrastructure on firm performance in a developing country and find elasticities of output with respect to road infrastructure ranging from 0.13 to 0.15 per cent. This confirms that roads are important for private output growth and, as our results are larger than those reported in the literature for developed countries, that transportation infrastructure is relatively more important for the economy of developing countries. We also identify a one-year time lag with which firms' outputs react to road stock changes. This could be indicative of firms requiring time to adjust their production to road changes. We furthermore identify that the effect of road infrastructure is particularly large for heavy manufacturing industries. Moreover, we investigate the regional heterogeneity of the role of transportation infrastructure for firms' output growth. Our results are robust to different econometric concerns. We additionally provide Monte Carlo simulations to support the validity of pseudo-panels in the context of firm-level data.

Using a panel of 265 regions from 24 OECD countries from 1997 to 2007, we explore the impact of nation-wide macroeconomic and structural policies on the productivity growth of subnational regions. We find that average relationships between nation-wide policies and regional productivity growth can hide strong differentiated effects according to the distance to the frontier: relaxing employment protection legislation on temporary contracts, lowering barriers to trade and investment and increasing trade openness enhances productivity growth in lagging regions, whereas reducing barriers to entrepreneurship or higher levels of government debt has a positive effect on regions closer to the productivity frontier.

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One of the possible causes of poorer labour market outcomes for workers in peripheral regions is the small size of cities in these regions. Given this possibility, and the difficulty of affecting city size directly, a frequent policy response has been to invest in transport in order to increase access to markets. In this chapter we investigate how local labour markets respond to these potential transport improvements. We use data on individual workers in the UK to assess how area wages respond to better market access and examine whether this variation is due to a changing composition of the labour market or to higher wages for existing workers. Our results indicate that the increase in wages associated with reductions in transport times stems from changes in the composition of the workforce and that wage increases for local workers with unchanged characteristics are minimal.