The Effects of "Doing Business": Measuring the Social Impact of Registration Costs in a Panel of 186 Countries
Since the publication of the World Bank’s first Doing Business project, the licensing and registration costs required to start a business have fallen drastically, particularly in developing countries. There is an existing body of research that seeks to explain to relationship between regulatory barriers to formalization, but no research that examines the cost alone and the distinct effects for varying levels of economic development. Using 10 years of data from the Doing Business project, this thesis uses fixed effects to examine the relationship between the cost of licensing, measured in relation to local per capita income, and various measures of social benefits: GDP per capita growth rates, natural log of GDP per capita, poverty rates, and income inequality. My results suggest that higher costs are significantly and negatively correlated with GDP per capita, and significantly and positively correlated with poverty rates and the Gini index. I find no statistically significant effect on GDP per capita growth rates. Furthermore, the effect of cost varies between OECD and Non-OECD countries, and there is a statistically significant different effect of cost in highly corrupt economies.
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