Business Reform Outcomes: Why So Different?

Stankov, Petar and Vasilev, Aleksandar (2019) Business Reform Outcomes: Why So Different? Journal of Policy Modeling . ISSN 0161-8938

Full content URL: https://doi.org/10.1016/j.jpolmod.2019.04.003://ww...

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Abstract

Post-crisis policy making increasingly focuses on doing business reforms. We argue that the effects of those reforms will be different across countries. To understand the reasons for the reform outcome divergence, we advance a novel firm-size distribution (FSDs) argument. At the center of the argument is the fact that FSDs are different across countries and stable over time. Then, if a given doing business reform induces firms of different size to grow differently, this will produce a variety of reform outcomes across countries. To advance the argument, we set up a tractable general equilibrium (GE) model and study how firms of different size grow after a doing business reform. The model predicts that larger firms will grow faster than smaller firms after the reform. The model predictions are tested on the Enterprise Surveys (ES) data, merged with the Doing Business indicators. We confirm that firms of different size grow differently after a Doing Business reform. Thus, based on the notable differences of firm size distributions across countries, identical reforms to start, operate and close a business will produce a variety of reform outcomes across countries.

Additional Information:The final published version of this article can be accessed online at https://www.journals.elsevier.com/journal-of-policy-modeling/
Keywords:reform-growth puzzle, doing business reforms, firm size
Subjects:L Social studies > L110 Applied Economics
N Business and Administrative studies > N120 International Business studies
L Social studies > L140 Econometrics
L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:33523
Deposited On:17 Oct 2018 10:19

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