institutional variables, this paper also includes the World Bank’s Governance Indicators (forthwith referred to as Governance Indicators) which rank political stability and absence from violence, corruption control, voice and accountability, regulatory quality, rule of law and government. An aggregate World Bank Governance Ranking, based on a simple average of the component indicators, is also included in some regressions. Different combinations of the Doing Business Rankings/components and the Governance Indicators are used to ensure robustness of results and counter possible multicollinearity. For example, arguably the Governance Indicators of government effectiveness, regulatory quality and rule of law are captured within the Doing Business components of starting a business and enforcing contracts – any correlation should be addressed in regression analysis.

Literature has extensively used the Doing Business Rankings and corresponding components in analysis (the World Bank Doing Business website lists more than 100 academic papers). Eifert (2009) focuses on individual components of the Doing Business Rankings and find improvements in the time taken to enforce contracts stimulates growth. However, Eifert (2009) fails to consider the aggregate impacts of all the Doing Business components. Conversely, Djankov, McLiesh and Ramalho (2006) do focus on aggregate impacts using cross-sectional analysis with fixed country effects. They show countries with a higher Doing Business Ranking in 2004 significantly influences growth. Surprisingly, Djankov _et al._ (2006) use as their dependent variable, the average GDP growth from 1993 to 2002 and estimate Doing Business Rankings using 2004 data (official rankings were not available until 2006). This approach could bias results as country rankings change over time and different results would be recorded when using data from alternative years.

Busse and Groizard (2008) use a separate set of fixed country effects when undertaking their crosssectional analysis on the influences of selected components of the World Bank’s Ease of Doing Business measures on GDP growth. Like Djankov _et al._ (2006), they also artificially create a rankings system but do so by creating a dummy variable of the 20 most regulated economies. They find countries with lower levels of regulation are more likely to stimulate growth. While the results are encouraging, the creation of a dummy variable reduces the richness of the data available for analysis and the authors do not disaggregate between developed and developing countries.

This paper expands on Busse and Groizard (2008), Djankov _et al._ (2006) and Eifert (2009) by using a more robust panel data set as opposed to cross-sectional analysis, considering the aggregate impact of reforms (as captured by the official World Bank rankings as opposed to artificially creating rankings), disaggregating impacts to developing countries and focusing specifically on the impact of Doing Business reforms on FDI inflows as opposed to the impacts on GDP growth.

# **3. Data and Methodology**

The study estimates the influence of the Doing Business Rankings (DBR), across approximately 84 countries, using data from the period when rankings officially began in 2006 to 2009. While there were 175 countries ranked in 2006, the number used in regression analysis varies due to the use of an unbalanced panel. The 2006 and 2007 rankings were gathered from the 2007 Doing Business report, the 4