Ease of Doing Business and Wealth Creation

Ease of Doing Business and Wealth Creation

Jorge Mongay (ESIC Business and Marketing School, Spain)
DOI: 10.4018/978-1-5225-3117-3.ch002

Abstract

This chapter is written as a conceptual document, trying to explain how the Ease of Doing Business (EDB) and the regulatory framework developed by governments can help to decrease poverty or to increase wealth in a given country. It explains the 10 most important variables analyzed by the World Bank in its EDB research project. This chapter also cites and provides comments on the journal papers that support the research methodology used by the World Bank. It also provides the reader with a conceptual literature review on EDB, it analyzes separated data by geographical regions and suggests conceptually country factors which could influence on the Ease of Doing Business in the future, being this factor of capital importance for governments interested in wealth creation and economic growth. The main goal of the chapter is to help the reader to identify the most crucial issues when evaluating EDB and its impact on economic performance and consequently on poverty reduction.
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1. The Ease Of Doing Business And Its Impact On The Creation Of Private Wealth

When we talk about the Ease of Doing Business (EDB) we should bear in mind that this concept refers to the day-to-day activities of the companies as well as the facilities or obstacles faced by them complying with national or local governments regulations. The term “Ease of Doing Business” is analyzed in depth through investigations such as the International Monetary Fund, and the World Bank, appearing as well cited in many journal articles by different authors. It is understood that a country which provides an easy framework for doing business on a day-to-day basis will receive more foreign investments and will generate the creation of new businesses contributing to decreased poverty. Previous research presented at the Academy of International Business and later published by Mongay and Filipescu (2011) state that there exists a significant level of positive correlation between the low levels of corruption in countries and the positions in the ranking of EDB suggesting that the more corrupt is the country the more difficult might be to do business and manage efficient operations.

As stated by Transparency International (2012) it is also important to keep in mind that approximately less than one-quarter of the total countries in the world are considered non-corrupt or less corrupt, so the other three-quarters of the world is made up of countries and territories where corruption is a reality on a daily basis, including big emerging markets as China, Russia, South Africa and Brazil.

The “Ease of Doing Business” approach provides a measurement of regulations existing in the countries analyzed. EDB provides an accurate measurement as well for sub-national and regional levels in some cases.

The Doing Business Project started in 2002, analyzing and comparing the rules governing activities of small and medium-sized enterprises throughout their complete life cycle. The research project collects and analyzes quantitative variables and compares the regulatory frameworks of different jurisdictions and countries. It also offers guidelines to reforms and provides the opportunity to countries and governments to simulate the impact of the reforms on its own EDB ranking. The EDB project and website are probably one of the most useful resources for academic members, journalists, researchers, etc.

The variables analyzed by the EDB project are extensive and very well chosen as follows:

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