BUSA 356 Lecture Notes - Lecture 6: Human Development Index, Forego, Informal Sector
Document Summary
Some of the most important obstacles that firms face globally (based on responses from the private sector) are access to finance, electricity, informality and tax rates. Countries that regulate entry more heavily have greater corruption and larger unofficial economies, but not better quality of public or private goods. If companies cannot easily set up shop due to greater amounts of red tape or hoops to jump through there may be increased levels of corruption. More businesses will also forego the difficult process entirely and choose to exist unlawfully. These businesses are not regulated and will not produce high quality goods/services. Creditor protection through the legal system and information sharing institutions such as credit bureaus are associated with higher ratios of private credit to gdp. Credit rises after improvements in creditor rights and in information sharing. Each additional day that a product is delayed prior to being shipped reduces trade by more than one percent.