competitiveness using 114 indicators in 137 economies.<sup>8</sup> It provides a score of between 0-100 for aggregate indicators ranking countries as well as for each of the areas of competitiveness. Another tool using a similar approach is the _Export Competitiveness Diagnostic Toolkit_ from the World Bank (Reis and Farole, 2012) which uses quantitative analysis to assess constraints to export competitiveness in 13 broad policy areas. It assesses a country’s overall basket of exports and/or specific traded sectors and identifies the main constraints to improved trade competitiveness and related policy responses.

Investment Climate Surveys are conducted at the firm level and thus focus primarily on investigating firm characteristics and how different firms relate to specific policy issues.<sup>9</sup> Conducted by the World Bank since the 1990s, _Enterprise Surveys_ provide firm-level surveys of a representative sample of an economy’s private sector.<sup>10</sup> While methodologically different to benchmarking approaches, they offer the same possibility of cross-country panel study as surveys share identical questions across the various countries in which they have been implemented. The surveys cover a broad range of business environment topics including access to finance, corruption, infrastructure, crime, competition, and performance measures. The available information now includes information on 139 countries gathered from 131,000 firms. Constraints facing firms can be ranked and the data can be parsed by size of firm and to a lesser extent by sectors.<sup>11</sup> The data consists of a mix of perception/recall data and actual revenue and cost information provided by firms. Enterprise surveys are periodically repeated allowing for a review of how constraints evolve over time and selectively for the use of panels. Based on the Enterprise Surveys, Investment Climate Assessment reports have been often produced which in addition to an in-depth analysis of the survey data also undertake a deeper analysis of investment climate constraints and potential solutions.

- Identification Frameworks

Already implicitly present in tools such as Doing Business and World Economic Forum approaches, is the idea of providing a comprehensive and organized framework through sets of policy variables (the “pillars”) that aim to reflect all the policies that impact respectively private sector activity and competitiveness. However, these frameworks come short of providing a true analytical structure to relate the various policies to the desired outcome and identify which matter more particularly given a specific country context.

The _Growth Diagnostics_ proposed by Haussmann and Rodrik<sup>12</sup> focuses on formulating growth strategies (to maximize social welfare) by identifying key reform priorities through an analysis of where market imperfections and distortions, and therefore failure of public interventions result in a difference between private and social rates of return. Since wholesale reform is not realistic, the framework uses a methodology to identify binding constraints focusing on the supply side of investment (i.e., inadequate

> 8 The areas are: basic requirements (i.e., institutions, infrastructure, macroeconomic environment and health and primary education); efficiency enhancers (i.e., higher education and training, goods market efficiency, labor market efficiency, financial market development, technological readiness and market size); and innovation and sophistication factors (i.e. business sophistication and innovation).

> 9 <u>http://www.enterprisesurveys.org/Methodology/Enterprise-Surveys-versus-Doing-Business</u>

> 10 The surveys are administered by a central unit in the World Bank though there is region specific collaboration with other institutions (e.g., with EBRD in Eastern Europe and Central Asia where the surveys are known as Business Environment and Enterprise Performance Surveys).

> 11 The main limitation for sector analysis is that the surveys focus on manufacturing oriented formal firms.

> 12 Hausmann, Rodrik and Velasco (2005) and Hausmann, Klinger and Wagner (2008).

4