Doing Business Rankings: How the World Bank influences national regulatory policy..

India jumping to 63rd rank in Doing Business Rankings is talk of the town.

Beth Simmons (Wharton), Judith G. Kelley (Duke University) and Rush Doshi (Brookings Institution) in a paper discuss how these rankings influence policy.

In this K@W discussion, the authors discuss key ideas behind the paper:

Knowledge@Wharton: Do you know from the work that you did if these global performance indicators are really one of the determining factors in policy change, or are they part of a larger process that these countries are undertaking? 

Kelley: We have talked with folks inside the bank who are very passionate about what they do and believe that they are promoting a set of good policies. And we find that they report that they worked very closely with policymakers in these countries. What happens behind the scenes is really interesting. People within these bureaucracies that Beth just referred to established links to the agencies that are rating and ranking — in this case, the bank — and have backs-and-forth about advice, about how laws and regulations could be drafted differently so that they will move up the rankings, but also in a belief that this is a good thing.

On the ground, we won’t necessarily see a legislator going, “We’re now passing this particular thing because of the ranking.” I think it much more will be what happens behind the scenes — that is what this paper helps to uncover — but that is also what is really the powerfulness of it.

Knowledge@Wharton: Is there a possibility that the data can be molded to fit the narrative that a politician would like to achieve?

Simmons: Oh, that is very true. Sometimes these ratings and rankings are literally used to achieve policy objectives that particular government officials have in mind. That is one of the things we definitely noticed in the India case. But another thing I think is really important to stress is, what does it mean to be ranked and to be rated? To take every country from top to bottom, from the very best down to the very worst of something. That is really a lot of the theory behind why this indicator works. It’s not just that it’s the World Bank, although it’s important that it’s the World Bank. But it’s that the World Bank is using information in a very particular way.

We had a set of hypotheses about how ranking influences policymaking. One way is that when publics see the way their country has been ranked, this can be used as ammunition or as data for which to lobby, which to call for reforms. It’s like, “We can do better, we’re behind our major competitors on these important dimensions.”

In a survey we launched, we found that publics really do respond competitively to comparisons. When we told a set of respondents that their government was not performing as well as their major competitor — we were using China and India in this test — they were much more likely to say, “It’s crucial to respond to improving our ranks, and it’s crucial to improve our business climate.” Just varying that piece of information about how your competitor is doing itself can have a pretty strong effect.

There are several such rankings these days:

Knowledge@Wharton: What do you believe with this growth of global performance indicators? There are benefits, but there are also negatives. Where do you think the greatest influence lies?

Kelley: To go back to the ease of doing business index, you can find several accounts of countries that were concertedly gaming the system to try to move up in the rankings. Georgia comes to mind. To the extent to which countries can figure out how to move up in a way that is rather empty when it comes to policies on the ground, that is a negative consequence because it is just spending energy on stuff that is meaningless.

If you take something like the ease of doing business index, there are winners and losers from choosing a regulatory or deregulatory framework to implement. Many of these are ideological contestations. What is the most prominent ranking in the world? In some ways you could rank GDP, right? This is one way of measuring prosperity in the world. Then you’ve got other indicators that come out and say, “Well, it’s really about people’s well-being, it’s about happiness, or it’s about sustainable prosperity,” or whatever. There are ideological bents or philosophies to each one of these. In the case of the bank, deregulation could harm the environment, it could harm workers. So, there are winners and losers from each of these perspectives.

Eventually, everything loses its value. Humans soon realise the ways to game systems/ranking created by the humans.

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