The Small Island that Could: The Private Sector as a Source of Mauritius’ High Regulatory Quality

Abstract

In the past few years economic research has empirically established the link between “good” regulation and development and there is a broad consensus over the fact that regulatory quality matters for economic growth. Up to now, however, there has not been much research on the determinants of regulation. This link is difficult to establish empirically due to methodological and data issues, but I find some evidence that the private sector, especially foreign investment, plays a significant role in regulatory making. To further elaborate this idea I look at the small island country of Mauritius that has exceptional regulatory quality. The main findings indeed point to a prominent role of the private sector and its collaboration with the government. The case study also shows that the determinants of good regulation are not limited to only one factor, but a wide array of influences and circumstances that make Mauritius the best regulated country in Africa and also put it among the best regulated countries in the world.

Keywords: Institutions, Regulations, Private Sector, Trade, FDI, Mauritius

JEL Classification: L51, O55, F19, F20