Business Environment Reform and Poverty: Rapid Evidence Assessment

This study assesses evidence on the direct impact of business environment reforms on poverty

Abstract

This rapid evidence assessment (REA) applies a systematic method of identifying, assessing and reviewing evidence to answer the research question: what is the evidence on the direct impact of business environment reforms on poverty? While poverty is a multidimensional phenomenon, this REA focuses primarily on the poverty impacts of business environment reforms in terms of increasing incomes and employment.

The evidence confirms that the links between business environment reform (BER) and poverty reduction are not direct: no studies were found presenting evidence of a direct link between BER and poverty reduction, but there is evidence on two broad channels through which BER has been found to indirectly contribute to poverty reduction.

In the first, BER is considered to directly affect the decisions made by businesspeople leading to increased firm investment. Fifty-four studies were found that address ways in which BER has affected firm behaviour, such as through registering their business, obtaining a license, registering for tax, dealing with labour laws, and land titling. Reforms that simplify and clarify these activities are seen to be largely beneficial for formalised businesses, but do not have the same impact on more informal enterprises.

A second group of twelve studies explored how BER affects economic growth. While there is strong and consistent evidence of a positive association between the quality of business regulation and economic growth, there is little evidence found that confidently asserts the relationship between BER and economic growth. This is largely due to the wide range of other factors that also affect this relationship, and many factors come into play when aggregate investment and employment are considered. Unlocking the potential for economic growth certainly requires reform of the businesses environment, but it is likely to require other interventions such as access to finance, improvements in infrastructure, etc.

Citation

White, S.; Fortune, P. Business Environment Reform and Poverty: Rapid Evidence Assessment. DFID, London, UK (2015) 72 pp.

Business Environment Reform and Poverty: Rapid Evidence Assessment

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