Time spent dealing with regulations

The Enterprise Surveys team has just finished surveying firms in the region of Europe and Central Asia (ECA). (For those interested in taking a closer look at the data, you can download the firm-level data (after registering) here or get country-level calculations from the Custom Query tool.)

One of the unique elements of Enterprise Surveys is that firms are asked for the percent of time that senior management spends dealing with government regulations. Doing Business, among other things, measures how burdensome it is for firms to comply with government regulations. The two sources of information are collected independently using entirely different methodologies. Nevertheless, the figure below (after the jump) shows that there is a strong correlation across countries between time spent dealing with regulations and the Doing Business rank.

The bars show the average time spent by senior management dealing with government regulations. The line shows the ranking from the Doing Business 2009 report. Senior managers in Georgia spend the least amount of time dealing with government regulations in the region. Georgia is also the best-ranked country in ECA according to Doing Business.

Georgia is just one example of a general pattern. Senior managers generally spend less time dealing with government regulations in countries with better ranks in Doing Business. (A spearman rank-order correlation model yields a result that is statistically significant at the 0.01 level).

Each hour spent dealing with government regulations is an hour not devoted to making the business more productive. The chart is one more example that shows the costs of business regulation vary substantially across countries.

What is the benefit of this time spent dealing with government regulations? It might help keep consumers safe, protect the environment, or have some other benefit. I’ll address this question in a future post.