Methodological Limits of 'Doing Business' Reports

Abstract

The methods used to construct indicators supposed to measure the quality of Legal systems and Institutions often meet with criticism. The present study is to complete this criticism. We will point out that the methodology, derived from A. Shleifer's work on Institutions assessment and "Law and Finance" approach, used in the World Bank Doing Business combines several weaknesses. The two major limits – the recourse to purely hypothetical cases and the technique of encoding law in binary variables – however, appear too difficult to remove without profoundly calling into question all measures undertaken in Doing Business reports. We argue that these methodological problems suggest, as a minimum, that one greatly differentiates when considering the statements and recommendations expressed in Doing Business reports.

Keywords: Doing Business reports, Governance indicators, Ease of doing Business indicator, A. Shleifer

JEL Classification: G2, K2, P51