Doing Business 2015 Data Notes

The indicators presented and analyzed in Doing Business measure business regulation and the protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of regulation, such as the number of procedures to start a business or to register a transfer of commercial property. Second, they gauge the time and cost to achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go through bankruptcy or trade across borders. Third, they measure the extent of legal protections of property, for example, the protections of minority investors against looting by company directors or the range of assets that can be used as collateral according to secured transactions laws. Fourth, a set of indicators documents the tax burden on businesses. Finally, a set of data covers different aspects of employment regulation. The 11 sets of indicators measured in Doing Business were added over time, and the sample of economies and cities expanded (table 1).

Methodology

The Doing Business data are collected in a standardized way. To start, the Doing Business team, with academic advisers, designs a questionnaire. The questionnaire uses a simple business case to ensure comparability across economies and over time—with assumptions about the legal form of the business, its size, its location and the nature of its operations. Questionnaires are administered to more than 10,600 local experts, including lawyers, business consultants, accountants, freight forwarders, government officials and other professionals routinely administering or advising on legal and regulatory requirements (table 2). These experts have several rounds of interaction with the Doing Business team, involving conference calls, written correspondence and visits by the team. For Doing Business 2015 team members visited 26 economies, including 10 new cities, to verify data and recruit respondents. The data from questionnaires are subjected to numerous rounds of verification, leading to revisions or expansions of the information collected.

The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing multiple interactions with local respondents to clarify potential misinterpretations of questions. Having representative samples of respondents is not an issue; Doing Business is not a statistical survey, and the texts of the relevant laws and regulations are collected and answers checked for accuracy. The methodology is inexpensive and easily replicable, so data can be collected in a large sample of economies. Because standard assumptions are used in the data collection, comparisons and benchmarks are valid across economies. Finally, the data not only highlight the extent of specific regulatory obstacles to business but also identify their source and point to what might be reformed.

Limits to what is measured

The Doing Business methodology has 5 limitations that should be considered when interpreting the data. First, for most economies the collected data refer to businesses in the largest business city (which in some economies differs from the capital) and may not be representative of regulation in other parts of the economy. The exceptions are 11 economies (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, Russia and the United States) that have a population of more than 100 million, where Doing Business, for the first time this year, also collected data for the second largest business city. To address this limitation, subnational Doing Business indicators were created. Second, the data often focus on a specific business form—generally 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 that 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.

Finally, 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 2015 would differ from the recollection of entrepreneurs reported in the World Bank Enterprise Surveys or other perception surveys.

Changes in what is measured

As part of a 2-year update in methodology, Doing Business 2015 incorporates 7 important changes. First, the ease of Doing Business ranking as well as all topic-level rankings are now computed on the basis of distance to frontier scores (see the chapter on the distance to frontier and ease of Doing Business). Second, for the 11 economies with a population of more than 100 million, data for a second city have been added to the data set and the ranking calculation. Third, for getting credit, the methodology has been revised for both the strength of legal rights index and the depth of credit information index. The number of points has been increased in both indices, from 10 to 12 for the strength of legal rights index and from 6 to 8 for the depth of credit information index. In addition, only credit bureaus and registries that cover at least 5% of the adult population can receive a score on the depth of credit information index.

Fourth, the name of the protecting investors indicator set has been changed to protecting minority investors to better reflect its scope—and the scope of the indicator set has been expanded to include shareholders’ rights in corporate governance beyond relatedparty transactions. Fifth, the resolving insolvency indicator set has been expanded to include an index measuring the strength of the legal framework for insolvency. Sixth, the calculation of the distance to frontier score for paying taxes has been changed. The total tax rate component now enters the score in a nonlinear fashion, in an approach different from that used for all other indicators (see the chapter on the distance to frontier and ease of Doing Business).

Finally, the name of the employing workers indicator set has been changed to labor market regulation, and the scope of this indicator set has also been changed. The indicators now focus on labor market regulations applying to the retail sector rather than the manufacturing sector, and their coverage has been expanded to include regulations on labor disputes and on benefits provided to workers. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of Doing Business. Beyond these changes there are 3 other updates in methodology. For paying taxes, the financial statement variables have been updated to be proportional to 2012 income per capita; previously they were proportional to 2005 income per capita. For enforcing contracts, the value of the claim is now set at twice the income per capita or $5,000, whichever is higher. For dealing with construction permits, the cost of construction is now set at 50 times income per capita (before, the cost was assessed by the Doing Business respondents). In addition, this indicator set no longer includes the procedures for obtaining a landline telephone connection.

Data challanges and revisions

Most laws and regulations underlying the Doing Business data are available on the Doing Business website. All the sample questionnaires and the details underlying the indicators are also published on the website. Questions on the methodology and challenges to data can be submitted through the website’s "Ask a Question" function.

Doing Business publishes 10,584 indicators (56 indicators per economy) each year. To create these indicators, the team measures more than 58,000 data points, each of which is made available on the Doing Business website. Historical data 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 backcalculated to adjust for changes in methodology and any revisions in data due to corrections. This year, however, the getting credit, paying taxes and labor market regulation indicators will be back-calculated for only one year because of the significant changes in methodology for these indicators. The website also makes available all original data sets used for background papers. The correction rate between Doing Business 2014 and Doing Business 2015 is 4.0%.

Governments submit queries on the data and provide new information to Doing Business. During the Doing Business 2015 production cycle the team received 105 such queries from governments. In addition, the team held videoconferences with government representatives in 27 economies and in-person meetings with government representatives in 13 economies.