number of countries but a relatively small sample of firm in each country, while the Investment Climate Survey (ICS) has a relatively smaller country sample but covers many more firms in each country (see below). These two datasets complete each other for our purpose: the WBES enables us to see whether the simple relation between perceptions and _de jure_ labor regulations is consistent across a large number of developing, transition and industrial countries. The ICS, on the other hand, provides information that enables us to carry out a deeper analysis of the reaction of firms to labor regulations.

# _World Business Environment Survey_

The World Business Environment Survey (WBES 2000) is a survey of over 10,000 firms in 81 countries that examines a wide range of interactions between firms and the State. Based on face-to-face interviews with firm managers and owners in late 1999 and early 2000, the WBES generated measurements in such areas as corruption, judiciary, lobbying and the quality of the business environment.<sup>12</sup> The main variable of interest in our analysis is the perception that respondents have of labor regulations. In the WBES this is measured through the following question: “ _Please judge on a four point scale_<sup>_13_</sup> _how problematic are these different regulatory areas for the operation and growth of your business (Please do not select more than 4 obstacles as the “major”)_ ”. In addition to labor regulations, seven other regulatory aspects are proposed: business licensing, customs/foreign trade regulation, foreign currency/exchange regulations, environmental regulations, fire/safety regulations, tax regulations/administration, and high taxes.

Through targeted selection and replacement, at least 100 surveys of private firms having representative characteristics were completed. In general, these characteristics include the following: (i) Sector: In each country, the sectoral composition in terms of _manufacturing_ (including agro-processing) versus _services_ (including commerce) is determined by relative contribution to GDP, subject to a 15% minimum for each category; (ii) Size: At least 15% of the sample are small firms and 15% are large firms; (iii) Ownership: At least 15% of the firms have foreign control. (iv) Exporters: At least 15% of firms are exporters, meaning that some significant share of their output is exported. (v) Location: At least 15% of firms are in the category “small city or countryside”.

> 12 The surveys were carried out following the same terms of reference in all countries. The questionnaire was translated  as required for each of the countries. It was pre-tested with at least five enterprises in each country to assure its appropriateness, adjusting translated phrases to make the survey more understandable. The questionnaire was then revised and codified as indicated by pre-testing and analysis. A sample frame of private businesses as complete as possible was developed in each country and from each a sample of at least 100 firms meeting the distributional criteria approved by the client was selected (World Bank, 2000). 13

> Where 1 = no obstacle, 2 = minor obstacle, 3 = moderate obstacle, 4 = major obstacle.

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