Doing business in a deals world: the doubly false premise of rules reform

Figures & data

Figure 1. There is a vast discrepancy between De Jure “rules” and the de facto “deals” outcomes.

Source: Author’s calculations from DB and ES data.

Figure 2. Countries are heterogeneous in deal making.

Source: Author’s calculations from DB and ES data.

Figure 2. (Continued).

Figure 3. Relationship between Doing Business (construction permit) and state capability.

Source: Author’s calculations from DB and World Development Indicators data.

Figure 4. Relationship between quick deals and Doing Business (construction permit).

Source: Author’s calculations from DB and ES data.

Figure 5. (a) Distribution of quick deals for Doing Business terciles. (b) Distribution of slow deals for Doing Business terciles

Source: Author’s calculations from DB and ES data.

Figure 6. Relationship between quick deals and state capability.

Source: Author’s calculations from DB and World Development Indicators data.

Table 1. Correlates of the percentage of quick deals (<15 days).

	1	2	3	4
	OLS	OLS	IV	IV
De Jure	−0.08***	−0.06***	−0.21***	−0.17*
	(0.00)	(0.00)	(0.00)	(0.09)
State Capability	−3.73***	−3.21*	−3.45***	−5.44**
	(0.00)	(0.06)	(0.00)	(0.02)
State History		1.10		−5.51
		(0.89)		(0.59)
Globalisation		0.11		0.06
		(0.51)		(0.77)
Oil Rent		−0.02		0.01
		(0.94)		(0.99)
Gas Rent		−0.82		−1.19
		(0.62)		(0.50)
Forest Rent		−0.26		−0.30
		(0.63)		(0.60)
Ethnic Fractionalisation		4.24		−5.14
		(0.59)		(0.66)
British Legal Origin		13.07***		11.52**
		(0.00)		(0.03)
Per Capita GDP		−0.0003		0.0005
		(0.59)		(0.54)
Constant	65.88***	51.44***	92.06***	88.88**
	(0.00)	(0.00)	(0.00)	(0.02)
Observation	129	98	126	98
R-sq	0.2463	0.3434	0.7576	0.8158
Underidentification (LM stat)			17.35	5.78
Underidentification (P-Value)			0.00	0.02

Note: P-value in parentheses. Level of significance: *** p < 0.01, ** p < 0.05, * p < 0.1.

The Underidentification test is based on Anderson Canonical Correlation LM Statistics. Uncentered R-sq for 2SLS.

Table 2. Correlates of the percentage of moderate deals (15–45 days).

	1	2	3	4
	OLS	OLS	IV	IV
De Jure	−0.01	−0.01	0.16	0.15*
	(0.26)	(0.58)	(0.01)	(0.08)
State Capability	0.05	−0.18	−0.42	1.86
	(0.92)	(0.86)	(0.57)	(0.37)
State History		−3.55		5.71
		(0.50)		(0.54)
Globalisation		0.12		0.28
		(0.24)		(0.11)
Oil Rent		−0.03		−0.09
		(0.84)		(0.69)
Gas Rent		0.99		1.64
		(0.34)		(0.30)
Forest Rent		0.35		0.47
		(0.32)		(0.35)
Ethnic Fractionalisation		−0.51		13.11
		(0.92)		(0.20)
British Legal Origin		−8.42***		−5.20
		(0.00)		(0.27)
Per Capita GDP		−0.0001		−0.001
		(0.83)		(0.14)
Constant	33.24***	28.25***	9.69	−29.12
	(0.00)	(0.00)	(0.31)	(0.37)
Observation	129	98	126	98
R-sq	0.0099	0.1428	0.8083	0.8193
Underidentification (LM stat)			17.35	5.78
Underidentification (P-Value)			0.00	0.02

Note: P-value in parentheses. Level of significance: *** p < 0.01, ** p < 0.05, * p < 0.1.

The Underidentification test is based on Anderson Canonical Correlation LM Statistics. Uncentered R-sq for 2SLS.

Table 3. Correlates of the percentage of slow deals (>45 days).

	1	2	3	4
	OLS	OLS	IV	IV
De Jure	0.09***	0.07***	0.10**	0.01
	(0.00)	(0.00)	(0.04)	(0.91)
State Capability	3.66***	3.40*	3.85***	3.50
	(0.00)	(0.06)	(0.00)	(0.13)
State History		3.16		−0.55
		(0.71)		(0.96)
Globalisation		−0.23		−0.33*
		(0.19)		(0.08)
Oil Rent		0.04		0.08
		(0.86)		(0.73)
Gas Rent		−0.15		−0.44
		(0.93)		(0.80)
Forest Rent		−0.09		−0.17
		(0.88)		(0.76)
Ethnic Fractionalisation		−3.79		−8.30
		(0.64)		(0.46)
British Legal Origin		−4.47		−6.16
		(0.38)		(0.24)
Per Capita GDP		0.0003		0.0005
		(0.54)		(0.50)
Constant	1.11	22.10	−1.14	40.96
	(0.82)	(0.14)	(0.91)	(0.26)
Observation	129	98	126	98
R-sq	0.2962	0.2727	0.8587	0.8697
Underidentification (LM stat)			17.35	5.78
Underidentification (P-Value)			0.00	0.02

Note: P-value in parentheses. Level of significance: *** p < 0.01, ** p < 0.05, * p < 0.1.

The Underidentification test is based on Anderson Canonical Correlation LM Statistics. Uncentered R-sq for 2SLS.

Table 4. Correlates of the percentage of quick deals (<15 days).

	1	2	3	4
De Jure			0.07
			(0.26)
State Capability			2.01
			(0.49)
De Jure_1	−0.09**	−0.14**		−0.01
	(0.04)	(0.01)		(0.87)
De Jure_2	−0.08**	−0.01		0.09
	(0.03)	(0.88)		(0.16)
State Capability_1	−6.15***	−5.75**		−0.73
	(0.00)	(0.03)		(0.84)
State Capability_2	−2.05	−1.87		2.56
	(0.12)	(0.40)		(0.42)
De Jure x State Capa.			−0.03**	−0.02*
			(0.02)	(0.06)
State History		1.62	2.61	2.42
		(0.84)	(0.75)	(0.77)
British Legal Origin		10.27**	11.37**	10.11**
		(0.04)	(0.02)	(0.04)
Geography		−18.78	−22.41*	−25.96*
		(0.14)	(0.09)	(0.05)
Globalisation		0.18	0.17	0.19
		(0.29)	(0.30)	(0.25)
Oil Rent		−0.16	−0.06	−0.13
		(0.50)	(0.79)	(0.56)
Gas Rent		0.99	−0.09	0.85
		(0.59)	(0.96)	(0.64)
Forest Rent		−0.12	−0.07	−0.06
		(0.82)	(0.89)	(0.91)
Ethnic Fractionalisation		1.94	2.42	1.71
		(0.80)	(0.75)	(0.82)
Per Capita GDP		−0.0002	0.0003	0.00003
		(0.65)	(0.64)	(0.95)
Constant	75.65***	72.63***	25.44	46.22**
	(0.00)	(0.00)	(0.14)	(0.03)
Observation	129	98	98	98
R-sq	0.262	0.3831	0.3894	0.4092

Note: P-value in parentheses. Level of significance: *** p < 0.01, ** p < 0.05, * p < 0.1

Table 5. Correlates of the percentage of moderate deals (15–45 days).

	1	2	3	4
De Jure			−0.02
			(0.57)
State Capability			0.31
			(0.87)
De Jure_1	−0.02	−0.01		−0.01
	(0.61)	(0.81)		(0.88)
De Jure_2	−0.01	−0.02		−0.03
	(0.58)	(0.30)		(0.52)
State Capability_1	0.19	0.48		0.48
	(0.87)	(0.76)		(0.83)
State Capability_2	−0.04	0.37		0.36
	(0.96)	(0.79)		(0.85)
De Jure x State Capa.			0.0006	0.00001
			(0.94)	(0.99)
State History		−4.64	−4.74	−4.64
		(0.36)	(0.35)	(0.36)
British Legal Origin		−6.22**	−6.34**	−6.22**
		(0.04)	(0.04)	(0.04)
Geography		22.97***	22.59***	22.97***
		(0.00)	(0.00)	(0.00)
Globalisation		0.04	0.05	0.04
		(0.68)	(0.65)	(0.68)
Oil Rent		0.08	0.07	0.08
		(0.59)	(0.60)	(0.59)
Gas Rent		−0.23	−0.11	−0.24
		(0.83)	(0.92)	(0.84)
Forest Rent		0.16	0.16	0.15
		(0.65)	(0.63)	(0.65)
Ethnic Fractionalisation		1.94	1.90	1.94
		(0.69)	(0.69)	(0.69)
Per Capita GDP		−0.0004	−0.0005	−0.0004
		(0.18)	(0.16)	(0.20)
Constant	33.09***	25.31**	27.66**	25.33**
	(0.00)	(0.01)	(0.01)	(0.06)
Observation	129	98	98	98
R-sq	0.01	0.2246	0.2234	0.2246

Note: P-value in parentheses. Level of significance: *** p < 0.01, ** p < 0.05, * p < 0.1

Table 6. Correlates of the percentage of slow deals (>45 days).

	1	2	3	4
De Jure			−0.05
			(0.42)
State Capability			−2.49
			(0.42)
De Jure_1	0.11***	0.15**		0.02
	(0.00)	(0.01)		(0.83)
De Jure_2	0.08	0.03		−0.07
	(0.01)	(0.48)		(0.31)
State Capability_1	5.93***	5.22*		0.02
	(0.00)	(0.06)		(0.99)
State Capability_2	2.07*	1.53		−3.06
	(0.09)	(0.51)		(0.36)
De Jure x State Capa.			0.03**	0.02*
			(0.03)	(0.06)
State History		3.78	2.85	2.95
		(0.66)	(0.74)	(0.73)
British Legal Origin		−3.90	−4.86	−3.73
		(0.46)	(0.34)	(0.47)
Geography		−4.42	−0.15	3.00
		(0.74)	(0.99)	(0.83)
Globalisation		−0.22	−0.22	−0.23
		(0.22)	(0.22)	(0.18)
Oil Rent		0.08	−0.02	0.05
		(0.76)	(0.94)	(0.84)
Gas Rent		−0.74	0.23	−0.59
		(0.70)	(0.90)	(0.76)
Forest Rent		−0.03	−0.09	−0.09
		(0.95)	(0.88)	(0.87)
Ethnic Fractionalisation		−4.01	−4.41	−3.76
		(0.63)	(0.59)	(0.65)
Per Capita GDP		0.001	0.0002	0.0004
		(0.24)	(0.74)	(0.51)
Constant	−8.79	1.78	47.50***	29.11
	(0.31)	(0.92)	(0.00)	(0.19)
Observation	129	98	98	98
R-sq	0.3116	0.3048	0.3176	0.3332

Note: P-value in parentheses. Level of significance: *** p < 0.01, ** p < 0.05, * p < 0.1

Figure 7. Increasing the De Jure regulation reduces quick deals for higher-capability states, but not for weak-capability states.

Figure 8. Increasing regulation increases the percentage of deals that are “slow” in strong capability countries, not in weak capability countries.

Figure 9. Policy diagnostic map for doing business.

Table 7. Doing Business diagnostics.

s	State capability
	Low	High
Less stringent	Nigeria (I)	Poland (II)
More stringent	Sudan (III)	Uruguay (IV)