not have a stock market may not be particularly concerned about the ‘Protecting Investors Index’ which measures the strength of legal protection of minor shareholders. Accordingly, it is important to bear in mind that a country’s ranking on a specific indicator may be worse compared to other countries because the issues it captures do not rank particularly high among the priorities of the business community.

To provide a more ‘subjective’ dimension to its more objective DB reports, the World Bank Group conducts large-scale surveys, the ‘Enterprise Surveys’, to identify country-specific obstacles to doing business.<sup>5</sup> These surveys are conducted irregularly, often two to four years apart, and ask business people to evaluate the sereneness of obstacles resulting from: the tax system (tax rates and administration), business licenses, and customs and trade regulations, access to land and finance, labor (regulation of the labor market and education of the work force), corruption, crime, theft and disorder, and the judicial system.

The Enterprise Surveys are not a perfect complement to the DB reports. For example, there is no DBI that captures the degree corruption or crime; on the other hand, the Enterprise Surveys have no close equivalent to the DB’s ‘Protecting Investors’ indicator. However, even though these surveys are conducted irregularly and do not always directly correspond to the DBIs, looking at the priorities of the local business community can help governments identify key reform areas. Thus unleashing the potential of the private sector is then likely to translate into increased economic activity and more jobs.

A more direct, but less country-specific, way of identifying reforms that maximize impact is to conduct a statistical analysis of the DBIs on key economic performance indicators. Djankov _et al._ (2006) put the DBIs to the test by examining the effect of countries’ DB rankings on economic performance.<sup>6</sup> They show that, indeed, a better investment climate results in stronger economic growth.<sup>7</sup> Whilst this provides evidence that an ‘enabling environment’ indeed promotes economic performance, the results as such have limited practicality for governments that want to engage in regulatory reform. Firstly, whilst there is evidence that a better investment climate is associated with higher growth, there are nine individual DBIs with overall 32 components, and not all of them may have an equal impact on economic performance. This paper will thus expand on Djankov _et al._ (2006) by examining the individual impact of these individual measures economic growth.

Secondly, Djankov _et al._ (2006) show that a better investment climate fosters economic growth; yet their analysis does not show that _improving_ the investment climate increases growth figures. This is an important thought drawing on Aghion et al. (2010). These scholars show that over-regulation is not an arbitrary nuisance but the reflection of a country’s more general anatomy: distrust fuels the demand for regulation, increasing corruption and consequently reinforcing distrust. There is just a vicious cycle around distrust and regulation. It is questionable whether reforming parts of the regulatory system can break through the vicious cycle and foster a more virtuous cycle that will result in a generally improved business climate.

This echoes the discussion above: the DBIs are only a sample of business regulations. Ameliorating the quality of the sample in a few areas does not necessarily make a decisive difference to the whole

> 5 Empirical evidence suggests that there is a strong link between subjective and objective business climate measures (Aterido and Hallward-Driemeier 2007).

> 6 For more recent and more fin-grained studies see also Servén and Loayza (2010) and chapters therein.

> 7 There is considerable scope for criticism of cross-country studies at the macro-level, see e.g. Dethier _et al._ (2010). However, firm-level studies support the core finding that a better regulatory business climate supports economic activity (Carlin _et al._ 2006; Gelb _et al._ 2007)

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