sector work, increase private sector wages (Bahal 2022; Berg et al. 2018; Imbert and Papp 2015), and increase output, although unevenly across districts (Cook and Shah 2022). However, with regard to overall effects, Muralidharan, Niehaus, and Sukhtankar (2023) find that the program raised private employment, increased workers’ reservation wages (the lowest wage that a worker will accept for a job), and boosted local demand.

Our proxies for product and labor market regulations are the product market policies index and the labor market regulation index from the Fraser Institute’s _Economic Freedom of the World_ . A higher product market policies score suggests greater flexibility in the product market, such as low costs of bureaucracy, low regulatory burdens, and low cost of tax compliance. A higher labor market score indicates more flexible labor market regulations, such as more flexible minimum wage regulations. The sub-indexes of the overall labor market score capture labor regulations and minimum wage policies, hiring and firing practices, flexibility in wage determination, regulation of working hours, costs associated with worker dismissal, and conscription. In our exercise here, we focus on the total labor market score and the labor regulation and minimum wage index.

# **Tax regimes**

Higher taxes have been associated with lower EWAPs. Corporate tax increases have reduced employment in U.S. counties and tax cuts have raised employment if implemented during recessions (Ljungqvist and Smolyansky 2016). Labor taxes, including payroll taxes, have been associated with slower employment growth in the European Union (Dolenc and Laporšek 2010).

Many studies identify employment effects of tax changes on a wide range of affected groups, especially in advanced economies. In France, following the introduction of a differential payroll tax regime, payroll tax increases were associated with significantly lower employment among affected workers, whereas decreases had no significant effects (Kramarz and Philippon 2001). In the United Kingdom, a tax regime that favored self-employment in the construction industry was associated with significantly higher self-employment (Briscoe, Dainty, and Millett 2000). In Switzerland, employment was higher in cantons with lower corporate and personal income taxes (Feld and Kirchgässner 2003).

Given the low tax collection prevalent in most EMDEs, we emphasize the firm-side of factors related to tax regimes. These variables are proxied using data from the World Bank’s _Enterprise Survey_ , which asks firms whether tax rates or tax administration constitute a major constraint on their activities. The variable used here is the percent of firms that identified tax rates or tax administration as a major constraint.

# **Policy uncertainty**

Political instability and corruption have been associated with weaker investment and weaker growth of firms, especially among mid-sized firms that often account for a large part of employment (Aterido, Hallward-Driemeier, and Pagés 2011; Batra and Stone 2008). We use two measures of policy uncertainty: political instability and corruption. Both measures are captured by the percent of firms citing the factor as major constraint in conducting business, as reflected in the World Bank’s _Enterprise Survey_ .

# **Land constraints**

Inefficient input markets, such as for land, may also constrain firms’ growth. Most research on land reforms has focused on the agricultural sector, where land redistribution, tenancy reforms, and consolidation have been shown to improve agricultural productivity, at least in some instances as seen in India (Banerjee, Gertler, and Ghatak 2002; Besley and Burgess 2000) and Ethiopia 14