In his presidential address to the American Economic Association, Avinash Dixit (2009) notes that laws and regulations are necessary for security of property rights, enforcement of contracts and overcoming collective action problems – something that the private sector cannot function without. However, laws and regulations are unlikely to have much beneficial effect if private agents are simply not aware of them. How easy is it for firms to obtain information on laws and regulations?
Good policy making – in the development field or in any field for that matter – involves three steps. First, a problem must be identified or a goal needs to be set. Second, policy measures that can take us to the stated goal need to be identified. The third step is to find the “least costly” policy measure, or what is called the “first-best” policy for achieving the goal.
Is Bhutan suffering from an acute case of Dutch Disease? Despite its status as the Shangri-La destination for A-list tourists, Bhutan’s land-locked status and nascent private sector pose enormous challenges for a country that is gradually moving to a more market-based economy. Thinking about this question is enough to transform one Bhutanese MP’s happiness to
Existing studies on business regulation – its determinants and effects – are largely focused on aggregate level measures. These aggregate level measures attempt to summarize many different types of regulations into a single monolithic whole. The key question then is how similar the underlying sub-components are in terms of their effects on economic activity and their determinants.
In response to a comment on my previous post on this topic, the table below the jump shows how the incidence and burden of crime, security and bribery (as points of comparison) vary by selected firm characteristics. (Differences that are significant at the 5% level are marked with an asterisk.)
A handful of studies that address this question have answered in the affirmative. In theoretical work, Alesina and Zeira (2006) and Blanchard and Philippon (2006) argue that rigid labor laws may encourage firms to substitute labor with computers. One implication is that we should find greater computer usage in countries or regions that have more rigid labor laws (other implications discussed below).
Do non-workers increase competition in retail markets? A recent study (Amin, 2008) on retailing in India suggests that the answer is yes. The study shows that for each additional non-worker per household in the city, the level of competition increases by about 42% of its mean level.
Editor's Note: Mohammad Amin is a PSD specialist in the Enterprise Analysis Unit of the World Bank.
Some months ago I discussed a paper on the myth of the entrepreneurial middle class. Abhijit Banerjee and Esther Duflo, two of the rockstars in the field of evaluation, argued in the paper that what development requires is "good jobs":
Editor's Note: David Kaplan is a PSD Specialist in the Enterprise Analysis Unit of the World Bank Group.
I had a great chat with Simon Corden, who stopped by my office in Washington, DC to talk about regulatory barriers. Simon is a consultant to the OECD, and one of the things he is interested in is reducing barriers to entry. He is focusing on Mexico right now, but also has experience in Australia. The Australian reform experience is a fascinating case of linking incentives and rewards.