Impact of business regulations on foreign direct investment inflows and economic growth in East African countries

Figures & data

Table 1. Overviews of Business regulation reforms and FDI

S.no	Authors/years	Titles and Models/techniques	Results/findings
1	(Nangpiire et al., 2018)	Ease of doing business and foreign direct investment inflow among Sub-Sahara African countries; Using Correlation and Regression analysis.	The paper found that, the overall ease of doing business indicators have a statistical influence in attracting FDIs into Sub-Sahara African countries.
2	(Vogiatzoglou, 2016)	Ease of Doing Business andFDI Inflows in ASEAN; A Panel econometrics analysis.	It found that an entrepreneurship-friendly and efficient business regulatory environment is a particularly important determinant of inward FDI.
4	(Hassan & Basit, 2018)	Ease of Doing Business and Its Impact on Inward FDI across the globe; Regression and Correlation analysis.	The findings of the study suggested the ease of doing business enables inward FDI through better contract enforcements, getting credit and registering property.
6	(Anggraini & Inaba, 2020)	The Impact of the Ease of Doing Business on Foreign Direct Investment across the globe; Fixed effect and two step GMM method.	The study found that the overall EDB score has a positive impact on attracting more inward FDI. Furthermore, this study considers getting credit and getting electricity as the most important indicators that drive inward FDI in the host countries.
8	(Haliti et al., 2019)	The Impact of the Ease Doing Business Indicators on Foreign Direct Investment in the European Transition Economies; A Dynamic panel methodology	Based on the results of the study, the main business-led indicators that have a positive and significant impact in attracting FDI in 16 European transition countries.

Source: Authors compilation

Table 2. Overviews of Business regulation reforms and economic growth

S.no	Authors/years	Titles and Models/techniques	Results/findings
1	(Bonga & Mahuni, 2018)	Assessing the Impact of Ease of Doing Business and Corruption on Economic Growth for Africa Free Trade Zone (AFTZ) Member States; Pooled OLS, Fixed effects, and random effects models.	The study findings shows that corruption, trading across borders, getting credit, registration of property,dealing with construction permits, and starting business have a significant impact on the economic growth.
3	(urban_benedikt, 2019)	The impact of India’s ease of doing business program on the manufacturing sector; A Pooled OLS, first difference and fixed effect estimations approaches.	The findings of the study indicated that an improvement in countries EDB sore raises in their Manufacturing sector GDP.
4	(Adepoju, 2017)	Ease of Doing Business and Economic growth across the globe; A panel random effects model	The study evidence obtained that the ease of doing business has an overall statistically significant effect on the annual growth rate of GDP per capita. However, the estimated coefficients of the EDB indicators for the subgroups (i.e., full sample, subsample or by income group) were found mixed results.
5	(Estevão et al., 2020)	The Doing Business ranking and the GDP. A qualitative study	The study concluded that credit the significant determining factor for both the ease of doing business and GDP per capita.

Source: Authors compilation

Table 3. EDB indicators and its data source

No	EDB indicators component	Doing business methodology	Acronyms of indicators	Expected signs	Source
1	Starting a Business	Total Score	SB	+	World Bank
2	Dealing with Construction Permits	Score (procedures)	DWCP	+	World Bank
3	Getting Electricity	Score (Cost to get electricity)	GE	+	World Bank
4	Registering Property	Total Score	RP	+	World Bank
5	Getting Credit	Total Score	GC	+	World Bank
6	Protecting Minority Investors	Total Score	PMI	+	World Bank
7	Paying Taxes	Score (Payment per year)	PT	-	World Bank
8	Trading Across Borders	Total Score	TAB	+	World Bank
9	Enforcing Contracts	Score (Cost % of claim)	EC	-	World Bank
10	Resolving Insolvency	Total Score	RI	+	World Bank

Table 4. EDB Indicators, FDI and Economic Growth in Eastern Africa

Variables	Obs	Mean	Std. Dev.	Min	Max
LogFDI	139	8.478023	.9327405	4.74367	9.825908
LogGDP	140	10.0512	.5435436	8.958076	10.82958
DWCP	140	58.41735	14.50199	26.66667	82.50976
EC	140	52.37285	10.80514	32.04614	70.46426
GC	140	7.907143	4.670274	1	19
GE	140	56.18092	20.08216	18.57597	87.92001
PT	140	79.98688	25.98443	0	100
PMI	140	50.85714	27.75758	0	100
RP	140	61.27754	10.26919	40.19684	93.70113
RI	140	34.91081	14.96348	0	69.06471
SB	140	72.05822	14.83445	27.94785	94.50762
TAB	140	53.29838	19.48339	15.44694	87.74397
RERENT	140	7.214828	5.560812	.0011713	24.98767
INF	139	6.795625	5.984576	−2.814698	32.01479
REXR	140	100.7245	32.62277	0	154.3899
OPEN	138	68.78769	41.59166	28.8153	216.4832
AVEGOV	140	34.12803	17.7864	5.303963	77.47997

Table 5. Diagnostics specification tests

Diagnostic tests	Chi-square and Significance values
Wald test for heteroscedasticity in FE model, χ^2 (14)	618.73
	(0.0000)
Breusch-Pagan LM test of independence, χ^2 (14)	−1.441
	(0.1497)
Wooldridge test for autocorrelation, F (1, 13)	32.134
	(0.0001)
Hausman test Fixed vs. Random effect, χ^2 (15)	105.39
	(0.0000)

Note: Numbers in parentheses are P-values

Source: Authors estimation

Figure 1. Correlation between Countries’ EDB Score and Its Change in GDP.

Source: authors compilation

Figure 2. Correlation between Countries EDB average score and its change in FDI Inflows.

Source: authors compilation

Table 6. Effects of ease of doing business indicators on FDI inflows and economic growth

Independent Variable	Dependent Variable (logFDI)	Dependent Variable: (logGDP)
Constant	5.820497*** (1.017851)	9.569*** (0.140)
Dealing with Construction permits	0.0054892*** (0.0016999)	0.000 (0.001)
Enforcing contracts	−0.021397*** (0.0052308)	−0.002** (0.001)
Getting credit	−0.0263388*** (0.0092639)	0.005** (0.002)
Getting electricity	0.0056464*** (0.002379)	0.001 (0.000)
Paying taxes	−0.0126403*** (0.0047973)	0.000 (0.000)
Protecting minority investors	0.0089712*** (0.0037501)	−0.002*** (0.000)
Registering property	0.0162025 (0.0091492)	0.000 (0.000)
Resolving Insolvency	0.0034261 (0.0066345)	0.005*** (0.001)
Starting a business	0.0190922 (0.0087713)	0.004*** (0.000)
Trading Across Borders	−0.001406 0.0022593	0.000*** (0.000)
Governance level, average	0.0303467*** (0.0119863)	−0.002** (0.000)
Resource rent	−0.007855 (0.0170947)	−0.003 (0.000)
Inflation rate	−0.001202 (0.0052391)	0.001 (0.001)
Real effective exchange rate	−0.0019151 (0.0052351)	0.001** (0.000)
Openness	0.0101204*** (0. 002974)	0.000 (0.000)
Number of observations	137	138
Number of countries	14	14
F-Statistic	135.84***	162.09***
R-squared (within)	0.2770	0.7841

Note: *10% **5% and ***1% levels of significance respectively. The numbers in the parenthesis are Driscoll-Kraay standard errors.

Table 7. Effects of ease of doing business total score on FDI inflows and Economic Growth

Independent Variable	Dependent Variable: (logFDI)	Dependent Variable: (logGDP)
Constant	6.480882*** (0.1506212)	9.139541*** (0.1162978)
EDB total score	0.0309731*** (0.0037162)	0.0224057*** (0.0030053)
Resource rent	0.0085292 (0.018322)	0.0080807*** (0.0033645)
Inflation rate	0.0366253*** (0.0155117)	0.0233755*** (0.004109)
Real effective exchange rate	−0.0004776 (0.000876)	−0.0008666 (0.0011598)
Openness	0.0005417 (0.0004708)	−0.0065807*** 0.0001198
Number of observations	137	138
Number of countries	14	14
F-Statistic	128.03***	2426.75***
R-Squared(within)	0.1206	0.3095

Note: *p <0.1 ** p <0.05 ***p <0.01. The numbers in the parenthesis are Driscoll-Kraay standard errors.

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