Thursday, May 26, 2011

Doing What?

Now, even if we all knew the Doing Business approach was a little flawed, THIS is very interesting from Lant Pritchett and Mary Hallward-Driemeie: a comparison of the Doing Business indicators and what firms actually report in the World Bank Enterprise Surveys.

“Doing Business” (DB) provides measures of the time and costs associated with fully complying with an array of business regulations; Enterprise Surveys (ES) ask a wide range of firms about their actual experiences in doing business. We use three comparable indicators in both to compare these distinct de jure (DB) and de facto (ES) approaches to assessing the “investment climate” in over 100 countries."

Four patterns emerge in each of the three indicators.

i) "While the DB, of necessity, reports a single estimate of the days for compliance for each indicator, firms in the same country report wildly different times to complete the same transaction"- OK, so HUGE/"wild" variation.

ii) "Regulatory compliance appears to be “under water as firms report actual times much less than the DB reported days" - the Doing Business is only one picture and maybe very misleading.

iii) "Cross-nationally there is very little association between the ES distributions and DB numbers. A naïve view of “full compliance” might suggest that actually reported days would rise one for one with DB days, but the patterns are much more complex. The de jure environment appears to only affect some firms." Ahaaa. Interesting.

iv) "For those countries with multiple ES surveys we find little association over time, with reductions in DB days as likely to be accompanied by increases in ES days." i.e. the DB surveys don;t seem to reflect reality!

"Comparing these two measures suggests very different ways of thinking about policy versus policy implementation, about what “climate” means, and what the options for “policy reform” really are." Indeed.

It also takes us back to the issue that different firms face different bureaucratic environments which presumably will depend on a lot of different firm characteristics. The REALLY interesting question is what those are... Size? Sector? Manager contacts? Location? There must be a tonne of interesting work still to come out of that...

And it kind of makes all the blurb about "engaging the private sector" seem a little disingenious. They're such a heterogeneous bunch, and we know so little about them, who are you actually engaging with?


(HT to this ex-Juba-based fellow)

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