Did raising doing business scores boost GDP?

Abstract

We use the time series variation in the World Bank’s “distance to frontier” estimates of the ease of doing business to assess the effects of changes in this variable on real GDP per capita. The use of Vector Autoregression techniques allows us to identify shocks to the Doing Business scores that are initially uncorrelated with GDP, thus addressing an important endogeneity problem that affects the cross-sectional literature on this topic. We report a robust finding that improvements in Doing Business scores have at least a temporary negative impact on GDP and find little evidence for a positive effect in the years following these improvements.