In an increasingly competitive global economy, many in the private sector wonder whether their businesses would be better off if they were located somewhere else. FRED has data that can help shed some light on which countries foster the best business conditions: The World Bank’s Ease of Doing Business Index ranks 190 countries according to a combination of 10 factors, including cross-border trade, tax payment, electricity access, property registration, construction permits, and other issues related to how well the rules and regulations benefit private enterprise.
Despite its appearance as a simple ranking, the Ease of Doing Business Index is fairly intricate. It provides overall rankings as well as rankings in several categories. For example, New Zealand was ranked 1st overall in 2016, but was 55th in terms of trading across borders. Afghanistan was ranked 183rd overall, but was 42nd in ease of starting a business. It also tries to measure how far each country is from the ideal, with minute changes sometimes causing large moves in the rankings.
At its core, the index is about administrative hurdles and costs and thus doesn’t capture some factors that are relevant to the private sector, such as market size, labor force quality, and corruption. But the index still reflects these factors indirectly, because of how closely they’re tied to the indicators that are measured. For example, although macroeconomic stability isn’t explicitly incorporated into a nation’s ranking, it still impacts the time and cost of getting credit or starting a business, which is part of the ranking process.
A final consideration is the fact that data can be collected only from the formal economy. Many nations have large informal sectors and thus can be ranked lower in the index than they might be otherwise: The data disproportionately represent the more easily measured transactions in the formal economies of developed nations without taking into account the similarly efficient transactions in the informal economies of other nations. But, of course, the size of a country’s informal sector is likely correlated with the (lack of) ease of doing business in its formal sector.
How this map was created: In GeoFRED, select “Build New Map.” In the tools menu, click “Data” and search for “ease of doing business.”
Suggested by Maria Hyrc and Christian Zimmermann.