Is there a causal link between the investment climate and growth? A review of the evidence, LASER, June 2015
|Funding agency(ies)||Department for International Development (DFID)|
|Date completed||June 2015|
This paper reviews the evidence for the proposition that investment climate improvements generate economic growth. Investment climate can be defined as the policies, rules, regulations and requirements that businesses must deal with to conduct business operations, but it is also useful to consider broader implications of bureaucratic quality and rule of law, the clarity, certainty and predictability of laws and their application. Between 2003 and 2012 some 180 economies have made it easier to do business by improving regulatory frameworks. But is there a causal mechanism between this apparent progress and growth?
This paper looks at investment climate reform in a number of contexts and reviews the evidence base for a causal link. The conclusion is that the overall evidence base is currently weak. The practical problem for programming is that there is very little knowledge about which particular Investment Climate reforms to prioritize in different contexts (including in fragile and conflict affected states).