The development of the small, and medium enterprise sector is believed to be crucial for economic growth, and poverty alleviation. Those who seek to develop the sector, must consent with the general perception that small- and medium-scale enterprises are at a disadvantage, compared with larger firms.
... See More + In theory, however, smaller firms may also have advantages over larger firms. For instance, they may be less affected by excessive regulations, because they can easily slip into informal arrangements. This paper draws on a new private sector survey covering eighty countries, and one territory to study the question whether business obstacles are related to firm size. The main finding is that there is indeed a bias against small firms. Overall, (that is, for the world sample) small firms report more problems than medium-sized firms, which in turn report more problems than large firms. In particular, smaller firms face significantly more problems than larger firms with financing, taxes and regulations, inflation, corruption and street crime. Thus these impediments should be prime targets for policies directed at leveling the playing field. Some of the most severe perceived impediments to doing business affect firms of all sizes, and consequently call for across-the-board policy improvements. In addition to the worldwide analysis, the paper presents an analysis by region, and by individual country.
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Credibility of rules and economic growth: evidence from a worldwide survey of the private sector, by Aymo Brunetti, Gregory Kisunko, and Beatrice Weder.
... See More + Does economic analysis improve the quality of foreign assistance? by Klaus Deininger, Lyn Squire, and Swati Basu. Demographic transitions and economic miracles in emerging Asia, by David E. Bloom and Jeffrey G. Williamson. The Bolivian Social Investment Fund: an analysis of baseline data for impact evaluation, by Menno Pradhan, Laura Rawlings, and Geert Ridder. International evidence on the determinants of private saving, by Paul R. Masson, Tamim Bayoumi, and Hossein Samiei. Unfair trade? The increasing gap between world and domestic prices in commodity markets during the past 25 years, by Jacques Morisset. A database of world stocks of infrastructure, 1950-95, by David Canning.
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A business environment characterized by 'incredible' rules such as unclear property rights, constant policy surprises and reversals, uncertain contract enforcement, and high corruption most likely translates into lower investment and growth.
... See More + The literature on growth and policies has suggested different ways to measure the relevant uncertainties. This article proposes a new measurement approach based on firm-level surveys and an indicator of the 'credibility of rules'. Using data from a private sector survey conducted in 73 countries and covering more than 3,800 enterprises, standard cross-country growth and investment analysis indicates that low credibility of rules is associated with lower rates of investment and growth. The survey was designed to capture local entrepreneurs' views of the predictability of changes in laws and policies, of the reliability of law enforcement, of the impact of discretionary and corrupt bureaucracies, and of the danger of policy reversals due to changes in governments. Confidence in the reliability of the survey results opens many avenues for further research that could exploit the micro dimensions of this data set.
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This discussion paper draws on a survey of private sector businesses conducted in preparation for the World Bank's World Development Report 1997 and on parallel surveys in OECD countries.
... See More + The focus is only on perceived government-related obstacles to doing business and report business responses by groupings of three or four countries (down to two in the case of some OECD countries) thereby breaking new ground.
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This technical paper considers how various dimensions of institutional uncertainty affect the developing countries' investment rates. The paper is the first to present a comparative analysis of uncertainty variables in sixty countries by means of a standardized data set, and to analyze the effects on investment over a uniform time period.
... See More + Private and total investment tend to be highly correlated. Therefore, the findings shed light on private investors' decisions in the face of uncertainty.
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Building reliable institutions that support a market system is widely believed to be critical to a successful economic transition. The authors present indicators on the predictability of the institutional framework across twenty transition economies -including indicators of the predictability of rules, political stability, the security of property rights, the reliability of the judiciary, and the lack of corruption.
... See More + They then investigate whether those indicators can explain differences in economic performance. The results suggest that the predictability of the framework may indeed explain a large part of differences in foreign direct investment and in economic growth among transition economies. Political stability and secure property rights are particularly important to entrepreneurial confidence in the economy.
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Policy Research Working Paper WPS1809 AUG 31, 1997
This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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Case studies and anecdotal evidence have suggested that uncertainty about policies, laws, and regulations has hampered development of the private sector in many developing countries.
... See More + The authors present results from a new cross-country survey that provides comparable data on local investors' problem in dealing with the state. The survey was conducted in 69 countries and covers more than 3,600 entrepreneurs. The questionnaire asked 25 questions about investors' perceptions about such issues as the predictability of laws and policies, the reliability of the judiciary, corruption in bureaucracies, and security of property rights. It also asked about general obstacles to doing business and the quality of state-delivered services. The authors discuss their methodology and present many findings. Among them: a) In less developed countries the majority of entrepreneurs constantly fear policy surprises and unexpected changes in rules that can seriously affect their business. Entrepreneurs in Asia have the most trust in government announcements of policy changes and changes in rules; entrepreneurs in the Commonwealth of Independent States are the most cynical about new announcements; and half of businessmen surveyed in Latin America and Central and Eastern Europe do not believe government announcements. b) Entrepreneurs worldwide feel that the cost of doing business is substantially increased by theft and crime and in many developing countries the business community feels that authorities do not adequately guarantee their personal safety and do not reliably enforce their property rights. c) Unreliable judiciaries are perceived as major problems in many developing countries. This applies in particular to the Commonwealth of Independent States and to Latin American countries. d) Entrepreneurs in industrial countries perceived the greatest obstacles to doing business to be tax regulations and high taxes, labor regulations, safety or environmental regulations, financing, regulations for starting new business and operations, and general uncertainty about the costs of regulation. e) Entrepreneurs in South Asia and Southeast Asia ranked the top obstacles to doing business as high taxes and tax regulations, inadequate infrastructure, inflation, labor regulations, and regulations for starting new businesses and operations. f) In the Middle East and North Africa, entrepreneurs considered lack of infrastructure the chief obstacle to doing business, followed by corruption, high taxes and tax regulations, and financing. g) In Central and Eastern Europe, high taxes and tax regulations were the only regulation-related obstacle ranked high, followed by financing, corruption, and inflation. h) The worst obstacles in Latin America were considered to be corruption and inadequate infrastructure, followed by crime and theft, problems with finance, and high taxes and tax regulation. i) In Sub-Saharan Africa the biggest problems were corruption, tax regulations and high taxes, inadequate infrastructure, inflation, crime and theft, and financing.
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Policy Research Working Paper WPS1759 APR 30, 1997
Economic theory and case study evidence have long suggested that institutional factors, such as well-defined property and contract rights, may be crucial in explaining differences in economic performance across countries.
... See More + Much of the recent discussion about "governance" has, for example, focused on the role of corruption and its consequences for investment and growth. By comparison, the empirical literature relating institutional factors with growth has been relatively scarce and has mainly concentrated on crude proxies such as' political instability and macroeconomic volatility. The problem of most of these variables in that they inadequately capture the uncertainties that are relevant for entrepreneurs. The authors propose new measure of institutional uncertainty based on the subjunctive evaluations of entrepreneurs. They surveyed the private sector in a broad cross-section of countries. The survey was designed to capture institutional factors such as the predictability of rules, entrepreneurs' fears of policy surprises and reversal, their perception of safety and security of property, the reliability of the judiciary, and their problems with bureaucratic corruption. The authors construct and test a summary indicator of the "credibility of rules," as well as its components in standard cross-country growth and investment regressions. The main findings: a) the overall indicator of credibility is significantly related with higher rates of investment and growth; b) the credibility indicator calculated for the subsample of small local companies is even more closely related to the growth performance; c) the subindicators "security of persons and property" and "predictability of rule-making" are most closely associated with growth; d) the indicators of "corruption," "perceived political instability," and "predictability of judiciary enforcement" are most closely associated with investment; and e) preliminary results for an extended sample - including transition economies - indicate that institutional factors may also help to explaining difference in economic performance in these countries.
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Policy Research Working Paper WPS1760 APR 30, 1997
This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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This is the twentieth in the annual series assessing major development issues. The report is devoted to the role and effectiveness of the state: what it should do, how it should do it, and how it can improve in a rapidly changing world.
... See More + Governments with both centrally-planned and mixed economies are shrinking their market role because of failed state interventions. This report takes an opposite stance: that state's role in the institutional environment underlying the economy, that is, its ability to enforce a rule of law to underpin transactions, is vital to making government contribute more effectively to development. It argues against reducing government to a minimalist state, explaining that development requires an effective state that plays a facilitator role in encouraging and complementing the activities of private businesses and individuals. The report presents a state reform framework strategy: First, focus the state's activities to match its capabilities; and second, look for ways to improve the state's capability by re-invigorating public institutions. Successful and unsuccessful examples of states and state reform provide illustrations.
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