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Do Business-Friendly Reforms Boost GDP?

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  • Tamanna Adhikari
  • Karl Whelan

Abstract

We use the time series variation in the World Bank’s “distance to frontier” estimates of the ease of doing business to assess the effects of changes in this variable on real GDP per capita. The use of Vector Autoregression techniques allows us to identify shocks to the ease of doing business that are initially uncorrelated with GDP, thus addressing an important endogeneity problem that affects the cross-sectional literature on this topic. The results are surprising. We report a robust finding that improvements to the ease of doing business have at least a temporary negative impact on GDP and find little evidence for a positive effect in the years following these improvements.

Suggested Citation

  • Tamanna Adhikari & Karl Whelan, 2019. "Do Business-Friendly Reforms Boost GDP?," Working Papers 201930, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:201930
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    File URL: http://hdl.handle.net/10197/11268
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    More about this item

    Keywords

    Economic growth; Business environment; Doing business;
    All these keywords.

    JEL classification:

    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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