How Business is Done and The'Doing Business'Indicators: The Investment Climate When Firms Have Climate Control

39 Pages Posted: 20 Apr 2016

See all articles by Mary Hallward-Driemeier

Mary Hallward-Driemeier

World Bank - Research Department; World Bank - Development Research Group (DECRG)

Lant Pritchett

Harvard University - Harvard Kennedy School (HKS); Center for Global Development

Date Written: February 1, 2011

Abstract

This paper examines de jure and de facto measures of regulations, finding the relationship between them is neither one for one, nor linear. "Doing Business" provides indicators of the formal time and costs associated with fully complying with regulations. Enterprise Surveys report the actual experiences of a wide range of firms. First, there are significant variations in reported times to complete the same transaction by firms facing the same formal policy. Second, regulatory compliance appears "under water" as firms report actual times much less than the Doing Business reported days. Third, the data reveal substantial differences between favored and disfavored firms in the same location. Favored firms show minimal variation, so Doing Business has little predictive power for the times they report. For disfavored firms, the variation is greater, although still not significantly correlated with Doing Business. Fourth, where multiple Enterprise Surveys are available, there is little association over time, with reductions in Doing Business days as likely to be accompanied by increases in Enterprise Surveys days. Comparing these two types of measures suggests very different ways of thinking about policy versus policy implementation, what "a climate" for firms in a country might mean, and what the options for "policy reform" really are.

Keywords: E-Business, Microfinance, Access to Finance, Climate Change Economics, Banks & Banking Reform

Suggested Citation

Hallward-Driemeier, Mary and Pritchett, Lant, How Business is Done and The'Doing Business'Indicators: The Investment Climate When Firms Have Climate Control (February 1, 2011). World Bank Policy Research Working Paper No. 5563, Available at SSRN: https://ssrn.com/abstract=1759154

Mary Hallward-Driemeier (Contact Author)

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

HOME PAGE: http://econ.worldbank.org/staff/mhallwarddriemeier

World Bank - Development Research Group (DECRG)

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States

Lant Pritchett

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-496-4562 (Phone)
617-496-2554 (Fax)

HOME PAGE: http://ksghome.harvard.edu/~lpritch/

Center for Global Development

2055 L St. NW
5th floor
Washington, DC 20036
United States

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