Questions about the methodology and data?
The ease of doing business ranking is now based on the distance to frontier score rather than on the percentile rank. The distance to frontier score benchmarks economies with respect to a measure of regulatory best practice—showing the gap between each economy’s performance and the best performance on each indicator. The ease of doing business ranking ranges from 1 to 189. The ranking of economies is determined by sorting the aggregate distance to frontier scores, rounded to 2 decimals. The aggregate distance to frontier score for each economy is the simple average of the distance to frontier scores on each of the 10 topics included in the ranking: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across border, enforcing contracts and resolving insolvency. All topics are weighted equally.
|Starting a Business
||Protecting Minority Investors
|Procedures, time, cost and paid-in minimum capital to start a limited liability company
||Minority shareholders’ rights in related-party transactions and in corporate governance
|Dealing with Construction Permits
| Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system
||Payments, time and total tax rate for a firm to comply with all tax regulations
||Trading Across Borders
|Procedures, time and cost to get connected to the electrical grid, the reliability of the electricity supply and the cost of electricity consumption
||Time and cost to export the product of comparative advantage and import auto parts
|Procedures, time and cost to transfer a property and the quality of the land administration system
||Time and cost to resolve a commercial dispute and the quality of judicial processes
|Movable collateral laws and credit information systems
||Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency
|Labor market regulation
|Flexibility in employment regulation and aspects of job quality
To start, the Doing Business team designs a questionnaire together with academic advisers. The questionnaire uses a simple standardized business case to ensure comparability across countries and over time—with assumptions about the legal form of the business, its size, its location and the nature of its operations.
Surveys are administered through more than 11,400 local experts, including lawyers, business consultants, accountants, freight forwarders, government officials and other professionals routinely administering or advising on legal and regulatory requirements.
These experts have several rounds of interaction with the Doing Business team, involving conference calls, written correspondence and country visits by the team. For Doing Business 2016 team members visited over 26 economies to verify data and recruit respondents.
The data from surveys are subjected to numerous rounds of verification, which lead to revisions or expansions of the information collected. The data for all sets of indicators in Doing Business 2016 are for June 1, 2015 (except for the Paying Taxes indicator, for which the data refer to January-December 2014).
The Doing Business project captures several important dimensions of the business regulatory environment as they apply to domestic firms. It provides quantitative analyses of regulations for the 11 areas captured by the report.
The project uses 2 types of data. The first type of data serves as input into indicators on the complexity and cost of regulatory processes. The second type of data comes from reading laws and regulations in each economy. In order to collect accurate data, the Doing Business team conducts several rounds of interactions with expert respondents. The objective of Doing Business is to measure the simplicity, efficiency and accessibility of the regulatory environment.
While the Labor Market Regulation (LMR) indicator is not included in the calculation of the ease of doing business ranking, the indicator has not been excluded from the Doing Business 2016 report. The LMR methodology was recently reviewed by internal and external consultative groups, with the aim of measuring the efficiency of employment regulation that favors job creation within international standards. Currently, the Labor Market Regulation raw data are presented as an annex in the Doing Business 2016 report and are not factored into the ease of doing business ranking.
The Doing Business methodology has the following caveats that should be considered when interpreting the data.
First, the collected data refer to businesses in the economy’s largest business city and may not be representative of regulation in other parts of the economy (except for 11 economies for which the second largest business city was added). To address this limitation, Subnational Doing Business indicators were created. The subnational studies point to significant differences in the speed of reform and the ease of doing business across cities in the same economy.
Second, the data often focus on a specific business form—a limited liability company (or its legal equivalent) of a specified size—and may not be representative of the regulation on other businesses, for example, sole proprietorships.
Third, transactions described in a standardized case scenario refer to a specific set of issues and may not represent the full set of issues a business encounters.
Fourth, the measures of time involve an element of judgment by the expert respondents. When sources indicate different estimates, the time indicators reported in Doing Business represent the median values of several responses given under the assumptions of the standardized case.
Fifth, the methodology assumes that a business has full information on what is required and does not waste time when completing procedures. In practice, completing a procedure may take longer if the business lacks information or is unable to follow up promptly. Alternatively, the business may choose to disregard some burdensome procedures. For both reasons, the time delays reported in Doing Business 2016 would differ from the experiences of entrepreneurs as reported in the World Bank Enterprise Surveys or other perception surveys.
Lastly, the ease of doing business ranking is limited in scope. It does not measure all aspects of the business environment that matter to firms or investors—or all factors that affect competitiveness. It does not, for example, measure an economy’s proximity to large markets, quality of infrastructure services (other than services related to Trading Across Borders), security of property, transparency of government procurement, macroeconomic stability, the labor skills or the underlying strength of institutions. Nor does it focus on regulations specific to foreign investment. Doing Business does not assess the strength of the financial system or market regulations, both important factors in understanding some of the underlying causes of the global financial crisis. It does not cover all regulations, or all regulatory goals, in an economy. For example, the indicators on Starting a Business or Protecting Minority Investors do not cover all aspects of commercial legislation.
The Doing Business research is conducted in cooperation with leading academic scholars. Each of the indicators underlying Doing Business is based on an academic paper, and all these papers have been or are in the process of being published in peer-reviewed academic journals. Doing Business has also compiled a list of research papers on topics covered by Doing Business.
Each indicator set measures a different aspect of the business regulatory environment. The distance to frontier scores and associated rankings of an economy can vary, sometimes significantly, across indicator sets. The average correlation coefficient between the 10 indicator sets included in the aggregate distance to frontier score is 0.37, and the coefficients between 2 sets of indicators range from 0.19 (between getting electricity and registering property) to 0.60 (between protecting minority investors and resolving insolvency). These correlations suggest that economies rarely score universally well or universally badly on the indicators.
Consider the example of Portugal. Its aggregate distance to frontier score is 76.03. Its score is 96.27 for starting a business and 85.20 for trading across borders. But its score is only 59.17 for protecting minority investors and 45.00 for getting credit.
Variation in performance across the indicator sets is not at all unusual. It reflects differences in the degree of priority that government authorities give to particular areas of business regulation reform and in the ability of different government agencies to deliver tangible results in their area of responsibility.
A high ranking on the aggregate ease of doing business means that the government has created a regulatory environment conducive to operating a business, as measured by the Doing Business indicators. Improvements in the Doing Business indicators are often a proxy for broader reforms to laws and institutions—whose effects go beyond the administrative procedures and the time and cost to comply with business regulations.
On average, high rankings in the Doing Business indicators are associated with better economic and social outcomes, but this association need not be linear. For example, expedient court procedures to resolve commercial disputes are welcomed by businesses. But to ensure a fair process, some procedural requirements are necessary, and these may cause delays.
There remains a large unfinished agenda for research into what regulation constitutes binding constraints, what package of reforms is most effective, and how this is shaped by country context. Empirical research is also needed to establish the optimal level of business regulation—for example, what the optimal duration of court procedures is and what the optimal degree of social protection is. The Doing Business indicators provide an empirical data set that may improve understanding of these issues.
Doing Business uses the World Bank regional and income group classifications, available here.
Questions on the methodology and challenges to data may be submitted to Doing Business via email.
Doing Business continually strengthens its indicators. Doing Business 2004 presented indicators in 5 topics: Starting a Business, Labor Market Regulation, Enforcing Contracts, Getting Credit and Resolving Insolvency. Doing Business in 2005 & added another 2 sets: Registering Property and Protecting Minority Investors. Doing Business in 2006 added 3 more sets: Dealing with Construction Permits, Paying Taxes and Trading Across Borders. Doing Business 2012 again added another indicator: Getting Electricity, for a total of 11 areas measured.
Doing Business also continues including more economies in the sample. Doing Business 2006 included 155 economies and Doing Business 2007 added 20 economies. Doing Business 2008 again added 3 new economies: Brunei, Liberia and Luxembourg. Doing Business 2009 added 3 other economies: The Bahamas, Bahrain and Qatar. Doing Business 2010 added 2 more economies: Cyprus and Kosovo. Doing Business 2013 again added 2 new economies: Barbados and Malta. In 2014, Doing Business added 4 new economies: Libya, Myanmar, San Marino and South Sudan, to include 189 economies in the sample. In Doing Business 2015, the second largest business city was added for the 11 economies with a population of more than 100 million. These are: Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States. In 12 years of publication, Doing Business publishes more than 100,000 data points each year on this website.
Data time series for each indicator and economy are available on the website, beginning with the first year the indicator or economy was included in the report. To provide a comparable time series for research, the data set is back-calculated to adjust for changes in methodology and any revisions in data due to corrections. The website also makes available all original data sets used for background papers. The correction rate between Doing Business 2015 and Doing Business 2016 was less than 5.5%. It is hard to compare this with other international data sets because they do not publish corrections rates. In this respect Doing Business is the most transparent data set of its kind.
Questions About Labor Market Regulation
Doing Business measures flexibility in the regulation of employment, specifically as it affects the hiring and redundancy of workers and the rigidity of working hours. Six areas of employment regulation are measured by the Labor Market Regulation indicators: the difficulty of hiring, the rigidity of hours, the difficulty of redundancy, the redundancy cost, social protection schemes and benefits, and labor disputes.
The indicators measuring flexibility in labor market regulations focus on those affecting the food retail industry, using a standardized case study of a cashier in a supermarket.
According to the case study assumptions, the company operates a super market or grocery store, in the economy’s largest business city. It has 60 employees, and is subject to collective bargaining agreements in economies where such agreements cover more than half the food retail sector and apply even to firms not party to them. The company abides by every law and regulation but does not grant workers more benefits than those mandated by law, regulation or (if applicable) collective bargaining agreements.
According to the case study assumptions, the worker is a cashier in a supermarket or grocery store. The worker is not a member of a labor union, unless membership is mandatory.
In Doing Business 2016, the Labor Market Regulation indicators record the minimum wage applicable to the worker described in the case study assumptions, a cashier, age 19 with one year of work experience. This Minimum Wage rate is the one published in the Doing Business 2016 report.
The minimum wage applicable to the worker described in the case study assumptions has been made available (please download the excel file with rates).
Doing Business 2016 does not present rankings of economies for the Labor Market Regulation indicators or include the topic in the aggregate ranking on the ease of doing business. The report does present the data on the Labor Market Regulation indicators in an annex.
In the past years, the team has been working with a consultative group - including labor lawyers, employer and employee representatives and experts from the ILO, OECD, civil society and the private sector - to review the Labor Market Regulation indicator’s methodology and explore future areas of research. The consultative group completed its work in 2011, and its guidance has provided the basis for several changes in methodology. The Doing Business 2016 report presents the data on the Labor Market Regulation indicators as an annex. Download the Consultative Group report with the main findings and recommendations.
The Doing Business project is grateful for the generous contribution of more than 10,7000 lawyers, accountants, freight forwarders, architects and public officials who serve as Contributors in 189 economies. Learn more.
This year's report, Doing Business 2016, can be purchased from Amazon.com. Previous reports are available for purchase in a hard-copy format from the World Bank's publications Web site.
The analysis in Doing Business has direct relevance for policy reform. It reveals the relationship between business regulation indicators and economic and social outcomes, allowing policymakers to see how particular laws and regulations are associated with poverty, corruption, employment, access to credit, the size of the informal economy, and the entry of new firms. Also, the analysis provides guidance on the design of reforms. The data offer a wealth of detail on the specific regulations and institutions that enhance or hinder business activity, the biggest bottlenecks causing bureaucratic delay, and the cost of complying with regulations. After reviewing their country's Doing Business indicators, governments can identify where they lag behind and what to reform.
What works in developed economies often works well in developing economies too, defying the often-used saying, "one size does not fit all." But reform options are not always the same across high income, upper middle income, low income and lower middle income economies. In such instances, developing economies could simplify the models used in developed economies to make them workable with less capacity and fewer resources. Moreover, the good practice examples presented in the Doing Business report are not limited to high income economies or economies where comprehensive regulatory reform has taken place. The report provides many examples of successful reforms in developing countries in some areas of business regulation.
Policymakers, the aid community, investors, and researchers use Doing Business indicators and analysis to: compare countries on their regulatory environment for business, assess the impact of laws and regulations on business activity, make informed decisions regarding policy reform and private investment, identify best practices in regulatory reform, and support research on institutions and regulation.