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July 22, 2012


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I note in passing that the Bank is still sulking about this. The "Employing Workers" metric was still used in the last report, but it wasn't included in calculating a country's score.

The party responsible seems to have been either Barney Frank or someone on his staff. Yeah, he'll be missed all sorts of ways.

Doug M.

What's the difference? If I'm interested in whether the labor environment is going to cost me or not, the metric is still there. Are people actually shifting FDI around based on nothing more than a single (arbitrary) composite score?

The difference is that many governments care about their overall score -- "Over the last five years, Stanistan has risen from 90th to 45th in the World Bank Ease of Doing Business Index!" So they'll undertake "reforms" in order to improve their rankings.

Which is the whole point of the exercise, to be sure -- but the Hiring Workers indicator rested on fairly shaky ground. There is research to show that making it easier to hire and fire workers affects employment (among other things), but the Bank had structured the indicator so that it was monotonically anti-regulation. This was really stupid, and people got legitimately ticked, especially when the Bank went into "We're the World Bank, so we don't have to listen to you" mode.

Anyway, to bring it back: most would-be foreign investors aren't going to focus too strongly on a single indicator (out of 11) unless it's really alarmingly bad.

Doug M.

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