Deals versus rules
Subtitle: policy implementation uncertainty and why firms hate it
By: Mary Hallward-Driemeier, Gita Khun-Jush, Lant Pritchett
Contributors: Khun-Jush, Gita; Pritchet, Lant; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16001; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16001.
Publisher: National Bureau of Economic Research
Published: 2010
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "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"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 5/27/2010.

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