Deals versus Rules: Policy Implementation Uncertainty and Why Firms Hate It
Firms in Africa report "regulatory and economic policy uncertainty" as a top constraint to their growth. We argue that often firms in Africa do not cope with policy rules, rather they face deals; firm-specific policy actions that can be influenced by firm actions (e.g. bribes) and characteristics (e.g. political connections). Using Enterprise Survey data we demonstrate huge variability in reported policy actions across firms notionally facing the same policy. The within-country dispersion in firm-specific policy actions is larger than the cross-national differences in average policy. We show that variability in this policy implementation uncertainty within location-sector-size cells is correlated with firm growth rates. These measures of implementation variability are more strongly related to lower firm employment growth than are measures of "average" policy action. Finally, we show that the de jure measures such as Doing Business indicators are virtually uncorrelated with ex-post firm-level responses, further evidence that deals rather than rules prevail in Africa. Strikingly, the gap between de jure and de facto conditions grows with the formal regulatory burden. The evidence also shows more burdensome processes open up more space for making deals; firms may not incur the official costs of compliance, but they still pay to avoid them. Finally, measures of institutional capacity and better governance are closely associated with perceived consistency in implementation.
|Date of creation:||May 2010|
|Date of revision:|
|Publication status:||Forthcoming: Deals versus Rules: Policy Implementation Uncertainty and Why Firms Hate It , Mary Hallward-Driemeier, Gita Khun-Jush, Lant Pritchett. in African Successes: Government and Institutions, Volume 1 , Edwards, Johnson, and Weil. 2016|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2000.
"The Colonial Origins of Comparative Development: An Empirical Investigation,"
NBER Working Papers
7771, National Bureau of Economic Research, Inc.
- Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
- Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, 02.
- Andrei Shleifer & Robert W. Vishny, 1993.
NBER Working Papers
4372, National Bureau of Economic Research, Inc.
- Hausmann, Ricardo & Rodrik, Dani, 2002.
"Economic Development as Self-Discovery,"
Working Paper Series
rwp02-023, Harvard University, John F. Kennedy School of Government.
- Hausmann, Ricardo & Klinger, Bailey, 2008. "Growth Diagnostics in Peru," Working Paper Series rwp08-62, Harvard University, John F. Kennedy School of Government.
- Irina Slinko & Ekaterina Zhuravskaya & Evgeny Yakovlev, 2005.
"Laws for Sale: Evidence from Russia,"
American Law and Economics Review,
Oxford University Press, vol. 7(1), pages 284-318.
- Irina Slinko & Evgeny Yakovlev & Ekaterina Zhuravskaya, 2004. "Laws for Sale: Evidence from Russia," Economics Working Papers 0046, Institute for Advanced Study, School of Social Science.
- Irina Slinko & Evgeny Yakovlev & Ekaterina Zhuravskaya, 2003. "Laws for Sale: Evidence from Russia," Working Papers w0031, Center for Economic and Financial Research (CEFIR).
- Marcel Fafchamps, 2004. "Market Institutions in Sub-Saharan Africa: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062364, June.
- Ricardo Hausmann & Bailey Klinger, 2008.
"Growth Diagnostic: Peru,"
IDB Publications (Working Papers)
44998, Inter-American Development Bank.
- Easterly, William & Levine, Ross, 2003.
"Tropics, germs, and crops: how endowments influence economic development,"
Journal of Monetary Economics,
Elsevier, vol. 50(1), pages 3-39, January.
- William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," Working Papers 15, Center for Global Development.
- William Easterly & Ross Levine, 2002. "Tropics, Germs, and Crops: How Endowments Influence Economic Development," NBER Working Papers 9106, National Bureau of Economic Research, Inc.
- Arne Bigsten & Mans Söderbom, 2006.
"What Have We Learned from a Decade of Manufacturing Enterprise Surveys in Africa?,"
World Bank Research Observer,
World Bank Group, vol. 21(2), pages 241-265.
- Bigsten, Arne & Soderbom, Mans, 2005. "What have we learned from a decade of manufacturing enterprise surveys in Africa ?," Policy Research Working Paper Series 3798, The World Bank.
- Gonzalez, Alvaro & Ernesto Lopez-Cordova, J. & E. Valladares, Elio, 2007. "The incidence of graft on developing-country firms," Policy Research Working Paper Series 4394, The World Bank.
- North,Douglass C. & Wallis,John Joseph & Weingast,Barry R., 2009.
"Violence and Social Orders,"
Cambridge University Press, number 9780521761734, 1.
- Christopher J. Green & Colin Kirkpatrick & Victor Murinde (ed.), 2005. "Finance and Development," Books, Edward Elgar, number 2764.
- Sequeira, Sandra & Djankov, Simeon, 2010. "An Empirical Study of Corruption in Ports," MPRA Paper 21791, University Library of Munich, Germany.
- Raymond Fisman, 2001. "Estimating the Value of Political Connections," American Economic Review, American Economic Association, vol. 91(4), pages 1095-1102, September.
- Hausmann, Ricardo, 2008. "The Other Hand: High Bandwidth Development Policy," Working Paper Series rwp08-060, Harvard University, John F. Kennedy School of Government.
- Arbache, Jorge Saba & Page, John, 2007. "More growth or fewer collapses ? a new look at long run growth in Sub-Saharan Africa," Policy Research Working Paper Series 4384, The World Bank.
- Arvind Subramanian & Francesco Trebbi & Dani Rodrik, 2002. "Institutions Rule: The Primacy of Institutions over Integration and Geography in Economic Development," IMF Working Papers 02/189, International Monetary Fund.
- Dollar, David & Hallward-Driemeier, Mary & Mengistae, Taye, 2005. "Investment Climate and Firm Performance in Developing Economies," Economic Development and Cultural Change, University of Chicago Press, vol. 54(1), pages 1-31, October.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16001. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.