granularity as well as focus on new policy issues (including sectoral ones) they make the problem in a way more complex, albeit in a positive way richer in information content. There is also the question of varieties of methodologies used in producing these indicators, which can be subject to limitations, thus creating uncertainty as to what are best-practice indicators.

_Absence of sector dimensions_ . A third limitation is that most tools fail to account for sector or product specific dimensions. In some cases, the sector dimension is nearly fully absent of the discussion and the focus is almost exclusively on country-level cross-cutting issues such as in Doing Business, the WEF indicators or Growth Diagnostics. Arguably, even policies that affect all sectors have different degrees of relevance for different sectors and thus priority reform order will be sector/product specific to some extent. Tools that use product and sector specific information such as gravity modeling and the GIFF are also not really designed to evaluate for sector specific policy dimensions. An early attempt to find the relevance and priority of policies at the sector level can be found in Pathikonda and Farole (2016). Another relevant development has been the use of sectoral gravity models to acknowledge the vastly different nature of trade for different products and industries (see Yotov et al., 2015, for a review).

In conclusion none of the current tools provides clear guidance on the choice of the relevant set of public policy reforms that could lead to improved outcomes. Because of their partial nature, existing tools while helping identify relevant policies offer little guarantee that reform will lead to change in outcomes, because other binding constraints may be missing from the diagnostic. Second because of the multiplicity of indicators, identification tends to be biased by how these indicators are constructed and it might be difficult also to distinguish between closely related indicators and which convey better information. Also, by failing to account for the sector specific responses existing tools lack focus. Arguably, the identification of constraints at the country level will reflect the constraints that affect sectors that are core to an economy because of averaging effect, but by the same token average effects might hide constraints that are very important for a core sector but not so much for the rest of the economy.

Ideally, one would want to achieve a level of analysis that cuts across both dimensions i.e., those which affect the economy as whole (cross-cutting enabling conditions), and those aspects which affect only particular economic sectors or firms. Moreover, the analysis should be detailed enough to offer concrete guidance for policy makers in view of implementation and focus on results.

# Constraints benchmarking

In this section, we briefly describe the investment constraints benchmarking tool (CBT) from which this empirical work derives, and which was developed to inform the World Bank Group’s Country Private Sector Diagnostics. The idea behind the tool is two-fold. In a spirit similar to the WEF, the CBT brings together and organizes in one place a substantial set of indicators. The tool builds on international surveys which contain information regarding factor prices and quantities (such as the World Development Indicators), and metrics of policies (such as Doing Business and Investment Climate surveys). It also builds on previous attempts to create composite measures of these dimensions such as the World Economic Forum’s competitiveness index. Second, and in a development from existing tools, the CBT proposes a way to measure each country’s performance at the sector level (instead of just at the economy-level) by observing the revealed preference of individual foreign direct investments.

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