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Evaluating Doing Business

Ryan Hahn's picture

Theory and much empirical evidence have suggested that Doing Business reforms are good for the business environment, and, consequently, good for employment and poverty reduction. But Doing Business reforms had never been subjected to the strictest kind of empirical test - until now. Recent evidence from Mexico based on a matched difference-in-difference evaluation - not too different from a randomized evaluation - has found that reducing the number of days to register a business does make a significant difference in the business environment. The second in the FPD Impact series of newsletters has the details:

  • The reform increased the number of registered businesses by 5 percent in eligible industries.
  • Employment increased by 3 percent.
  • Consumer prices decreased, presumably due to the increase in competition from new businesses.
  • Incumbent businesses saw a drop in their income of about 3 percent.

I think the second finding is perhaps the most telling. As the author of the newsletter explains, "business registration reform also has positive effects on the economy as a whole. The reform in Mexico increased employment, providing employment to individuals who were previously not employed." With rising rates of unemployment around the world due to the financial crisis, this is just the kind of reform that is called for.

  

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