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Improvements in the World Bank's ease of doing business rankings : do they translate into greater foreign direct investment inflows ?

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  • Jayasuriya, Dinuk
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    Abstract

    The World Bank's Ease of Doing Business reports have been ranking countries since 2006. However, do improvements in rankings generate greater foreign direct investment inflows? This study is the first to test such a proposition empirically with Arellano-Bond dynamic panel estimators using the official rankings from 2006 to 2009. The paper shows this relationship is significant for the average country. However, when the sample is restricted to developing countries, the results suggest an improved ranking has, on average, an insignificant (albeit positive) influence on foreign direct investment inflows. Although robust, this result should be taken with caution given that it refers to the average developing country using data across a four-year time period. Finally, the paper demonstrates that, on average, countries that undertake large-scale reforms relative to other countries do not necessarily attract greater foreign direct investment inflows. This analysis may have important ramifications for developing country governments wanting to improve their Doing Business Rankings in the hope of attracting foreign direct investment inflows.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5787.

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    Date of creation: 01 Sep 2011
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    Handle: RePEc:wbk:wbrwps:5787

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    Keywords: Debt Markets; Competitiveness and Competition Policy; Business in Development; Business Environment; Emerging Markets;

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    12. David Kaplan & Eduardo Piedra & Enrique Seira, 2006. "Are Burdensome Registration Procedures an Important Barrier on Firm Creation? Evidence from Mexico," Discussion Papers 06-013, Stanford Institute for Economic Policy Research.
    13. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2010. "Does foreign direct investment promote growth? Exploring the role of financial markets on linkages," Journal of Development Economics, Elsevier, vol. 91(2), pages 242-256, March.
    14. International Monetary Fund, 2010. "FDI Flows to Low-Income Countries: Global Drivers and Growth Implications," IMF Working Papers 10/132, International Monetary Fund.
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    16. Črt Kostevc & Tjaša Redek & Andrej Sušjan, 2007. "Foreign Direct Investment and Institutional Environment in Transition Economies," Transition Studies Review, Springer, vol. 14(1), pages 40-54, May.
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