**Feasibility** relates to the political economy of reform. Generally, one can think about feasibility both in terms of cost and political will. Regarding the former, the indicator ‘Enforcing Contracts’ provides a good example. To reduce the time and cost it takes to settle a legal dispute in court, capacity of the judicial system must be enhanced. This often requires hiring additional judges and constructing or expanding court buildings – both associated with immense costs. A government with a strained national budget, as is the case in most developing (and even developed) countries, will have limited ability to address this indicator with the resources available. It would be significantly more cost-effective to address another indicator instead. For example, the ‘Starting a Business’ indicator could simply be improved by removing red tape that delays the incorporation of businesses. In many cases this merely requires new and more efficient ministerial regulations.

Political will is another important determinant of the feasibility of reform. In most cases, leaner legislation means a reduced role for government. This is most obvious in the case of business tax rates under the ‘Paying Taxes’ indicators where lower revenue immediately translates into smaller government.<sup>2</sup> But the lack of political will can obstruct regulatory reform in many more areas and need not always be monetary. At least since Niskanen’s (1968) seminal work on the incentives of bureaucrats, it has been appreciated that government officials try to maximize their power. And power can manifest itself in monetary terms but also in less tangible forms like authority. Improving conditions to obtain business in addressing the ‘Dealing with Licenses’ indicator, for example, can have an impact on the revenue and authority of the responsible ministries (generally the Ministry of Trade or its equivalent), as bureaucrats lose their power to collect license fees and pre-screen, monitor, or supervise businesses. This can result in significant government-internal forces to block reform efforts.

Yet while a disciplined government may be able to deal effectively with internal conflict, some of the issues captured by the DB studies transcend borders and are thus beyond the full control of individual governments. The ‘Trading Across Borders’ indicator can only be fully addressed if governments from neighboring countries cooperate. To the extent that borders are politically sensitive as they relate to a country’s core interests like sovereignty, national security, and other foreign policy matters, this indicator may be difficult for governments to address if their neighbors do not share an interest in improving the conditions for cross-border trade. The feasibility of reform is thus a crucial factor to consider for governments that aim to improve their DB rankings.

Assuming that several reforms are feasible, governments may still want to prioritize some reforms over others, given limited public resources. Visibility and impact are the two factors that can help government in deciding on the reforms to embark on.

**Visibility** refers to the impact the DB ranking, and in particular reform efforts, will have on perceptions. The DBIs attract considerable attention in the media and countries that are most committed to reform are singled out in the annual DB reports. In 2010, Rwanda was the top reformer, and Rwanda remained a strong performer in 2011 – when Kazakhstan improved its DB ranking the most. To countries that are eager to improve their image as a business-friendly location the DB rankings can be an excellent publicity tool.

Governments may wish to improve their image for several reasons. For one, an improved DBI ranking may result in larger Foreign Direct Investment (FDI) inflows. FDI can have spill-over effects and increase the productivity of domestic industries and hence economic growth (Rodriguez-Clare, 1996; Markusen

> 2 At the same time, it could be argued that reducing tax rates constitutes a cost to government if the definition of ‘cost’ entails forgone revenue.

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