Summary |
Despite greater macroeconomic stability and increased openness to trade and investment, many developing countries have failed to thrive. This original study links microeconomic regulation to aggregate measures of growth, productivity, and volatility to explain the poor performance of emerging economies around the world, and especially in Latin America. The authors convincingly show that excessive regulation of business and labor has led to adverse macro performance. Stringent regulations perform a double punch. First, they prevent resources from moving to their most productive uses and economies from adjusting to external shocks. Second, they provide insidious incentives for rent seeking to the relevant authorities, especially when governance is weak. Business Regulation and Economic Performance is essential reading for policy makers seeking to improve growth and stability in developing countries.
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