government in policy compliance. These Enterprise Surveys (ES)<sup>3</sup> have now covered over 100,000 firms in 117 countries, some with repeat surveys.<sup>4</sup> The metaphor of a ―climate‖ for these measures is instructive. Every day newspapers report the temperature in cities around the world. Suppose in each city there was both an official thermometer and thousands of _outdoor_ thermometers in houses around the city. What do we expect from these measurements if we are capturing places with meaningful difference climates? 5 First, the variance of the outdoor temperatures around a given city (at a specified time of day, etc.) should be small compared to the inter-city variability: if it is hot in Phoenix and cool in Boston, it is hotter everywhere in Phoenix than anywhere in Boston. Second, regressing household temperature in city X on official temperature in city X would produce a coefficient near one. Third, one would expect the variance across household reported temperatures to be invariant to the official temperature. Fourth, changes in the official temperature would be highly associated with changes in outdoor household temperatures.

Imagine the same thought experiment with _experienced_ temperature for a given individual in a rich country. None of the above is true. First, the main variance in experienced temperature is _person specific._ If it is July and you are indoors in Phoenix you are probably experiencing the same temperature as a person indoors in Boston, but a wildly different experienced temperature than anyone outdoors in Phoenix. Second, experienced indoor temperature may have no association with outdoor temperature. Third, _variance_ in _experienced_ temperature gets larger the further the outdoor temperature is from the ideal—towards either hot

> 3 The Enterprise Surveys build on a number of prior efforts with different names, that since 2005 have been standardized and use the same questionnaire and methodology, while maintaining their brand name in their respective regions, e.g. Regional Program on Enterprise Development (RPED) in Africa; Business Environment and Enterprise Performance (BEEPS) in Eastern Europe and Central Asia. Investment Climate Surveys were conducted prior to 2005, using largely the same questionnaire but with sample generally restricted to manufacturing firms.

> 4 The Enterprise Surveys (including their precursors World Business Environment Survey, BEEPS, RPED) have been used to show the importance of finance, corruption and property rights (Beck et al. 2005; Ayyagari, DemirgüçKunt and  Maksimovic 2008; Gatti and Fisman 2006; Cai et al 2006; Fisman and Svensson, 2007), the relationship between business environment and firm growth, (Dollar, Hallward-Driemeier and Mengistae, 2005; Haltiwanger and Schweiger 2005; Dollar et al, 2006; Hallward-Driemeier Wallsten and Xu 2006; Aterido, Hallward-Driemeier and Pages, forthcoming; Eifert et al 2008; Fernandes and Pakes 2008;); firm innovation(Almeida and Fernandes 2008; Ayyagari , Demirgüç-Kunt and Maksimovic 2010); informality (La Porta and Shleifer, 2008); labor protections (Pierre and Scarpetta 2006; Almeida and Carneiro 2009).  Two survey articles provide reviews of the literature drawing primarily on Enterprise Survey like data: Bigsten and Soderbom, 2006 and Xu 2010.

> 5 Which imply that a ―country‖ may or may not be a meaningful definition of ―place‖ for describing climates. Certainly, one cannot imagine asserting that the USA, which ranges from Maine to Florida and Alaska to Hawaii, has a meaningful ―climate‖ in the way that a small country like Jamaica might.

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