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Hallward-Driemeier, Mary

Equitable Growth, Finance, and Institutions
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Fields of Specialization
Private sector development, Firm dynamics, Firm Productivity, Entrepreneurship, Women's economic empowerment, Investment climate, Gender, Development Economics
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Equitable Growth, Finance, and Institutions
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Last updated: January 31, 2023
Biography
Mary Hallward-Driemeier is Senior Economic Adviser in the Equitable Growth, Finance and Institutions Vice Presidency at the World Bank, overseeing its analytical agenda on private sector development. She joined the World Bank in 1997 as a Young Professional. She has published widely on firm productivity, the economics of technological change and the impact of crises. She leads the Jobs and Economic Transformation special theme for the International Development Association (IDA). She has served as advisor to two World Bank’s Chief Economists, co-manager of the Jobs Group, and Deputy Director for the World Development Report 2005: A Better Investment Climate for Everyone. Her previous books include Trouble in the Making? The Future of Manufacturing-Led Development (with Gaurav Nayyar) and Enterprising Women: Expanding Economic Opportunities in Africa. Mary received her AB from Harvard, her MSc in Development Economics from Oxford as a Rhodes Scholar, and her PhD in Economics from MIT.
Citations 31 Scopus

Publication Search Results

Now showing 1 - 10 of 12
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Deals versus Rules : Policy Implementation Uncertainty and Why Firms Hate It

2010-05-01, Hallward-Driemeier, Mary, Pritchett, Lant

Firms in Africa report "regulatory and economic policy uncertainty" as a top constraint to their growth. This paper argues that often firms in Africa do not cope with policy rules, rather they face deals: firm-specific policy actions that can be influenced by firm actions (such as bribes) and characteristics (such as political connections). Using Enterprise Survey data, the paper demonstrates huge variability in reported policy actions across firms notionally facing the same policy. The within-country dispersion in firm-specific policy actions is larger than the cross-national differences in average policy. The analysis shows that variability in this policy implementation uncertainty within location-sector-size cells is correlated with firm growth rates. These measures of implementation variability are more strongly related to lower firm employment growth than are measures of "average" policy action. The paper shows that the de jure measures such as Doing Business indicators are virtually uncorrelated with ex-post firm-level responses, further evidence that deals rather than rules prevail in Africa. Strikingly, the gap between de jure and de facto conditions grows with the formal regulatory burden. The evidence also shows more burdensome processes open up more space for making deals; firms may not incur the official costs of compliance, but they still pay to avoid them. Finally, measures of institutional capacity and better governance are closely associated with perceived consistency in implementation.

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How Business Is Done and the ‘Doing Business’ Indicators : The Investment Climate When Firms Have Climate Control

2011-02-01, Hallward-Driemeier, Mary

This paper examines de jure and de facto measures of regulations, finding the relationship between them is neither one for one, nor linear. "Doing Business" provides indicators of the formal time and costs associated with fully complying with regulations. Enterprise Surveys report the actual experiences of a wide range of firms. First, there are significant variations in reported times to complete the same transaction by firms facing the same formal policy. Second, regulatory compliance appears "under water" as firms report actual times much less than the Doing Business reported days. Third, the data reveal substantial differences between favored and disfavored firms in the same location. Favored firms show minimal variation, so Doing Business has little predictive power for the times they report. For disfavored firms, the variation is greater, although still not significantly correlated with Doing Business. Fourth, where multiple Enterprise Surveys are available, there is little association over time, with reductions in Doing Business days as likely to be accompanied by increases in Enterprise Surveys days. Comparing these two types of measures suggests very different ways of thinking about policy versus policy implementation, what "a climate" for firms in a country might mean, and what the options for "policy reform" really are.

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Strengthening Economic Rights and Women's Occupational Choice : The Impact of Reforming Ethiopia's Family Law

2013-11, Hallward-Driemeier, Mary

This paper evaluates the impact of strengthening legal rights on the types of economic opportunities that are pursued. Ethiopia changed its family law, requiring both spouses' consent in the administration of marital property, removing the ability of a spouse to deny permission for the other to work outside the home, and raising women's minimum age of marriage. Thus both access to resources and the removal of restrictions on employment served to strengthen women's bargaining position within the household and their ability to pursue economic opportunities. Although this reform now applies nationally, it was initially rolled out in the two chartered cities and three of Ethiopia's nine regions. Using nationally representative household surveys from just prior to the reform and five years later allows for a difference-in-difference estimation of the reform's impact. The analysis finds that women were relatively more likely to work in occupations that require work outside the home, employ more educated workers, and in paid and full-time jobs where the reform had been enacted, controlling for time and location effects. As the relative increase in women's participation in these activities was 15-24 percent higher in areas where the reform was carried out, the magnitude of the impact is significant too.

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Women's Legal Rights over 50 Years : Progress, Stagnation or Regression?

2013-09, Hallward-Driemeier, Mary, Hasan, Tazeen

Using a newly compiled database of women's property rights and legal capacity covering 100 countries over 50 years, this paper analyzes the triggers and barriers to reform. The database documents gender gaps in the ability to access and own assets, to sign legal documents in one's own name, and to have equality or non-discrimination as a guiding principle of the country's constitution. Progress in reducing these constraints has been dramatic -- half of the constraints documented in the 1960s had been removed by 2010. However, some sticky areas persist where laws have not changed or have even regressed. The paper analyzes potential drivers of reforms. A significant finding is that the relationship with a country's level of development and the extent of its reforms is not straightforward. For the first half of the sample, there was no systematic connection; only in the last 25 years have increases in income been associated with higher probabilities for reform, but only in lower-income countries. With the remaining constraints as prevalent in middle- as low-income countries, increased growth is not necessarily going to spark additional reforms. Clearer patterns emerge from the momentum created by international conventions, such as the Committee to Eliminate All Forms of Discrimination against Women (CEDAW), women's political representation at the national level, mobilization of women's networks, and increasing labor force participation in sectors that provide a voice for women, which are positive forces for change. Conversely, conflict and weak rule of law can entrench a discriminatory status quo. And much is at stake; strengthening women's legal rights is associated with important development outcomes that can benefit society as a whole.

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Who Survives? The Impact of Corruption, Competition and Property Rights across Firms

2009-10-01, Hallward-Driemeier, Mary

Size, age, sector, and productivity are commonly cited as factors determining a firm s survival. However, there are several dimensions of the investment climate in which the firm operates that affect whether it continues in business or exits. This paper uses new panel data from 27 Eastern European and Central Asian countries to test the importance of five areas of the business climate on firm exit: the efficiency of government services, access to finance, the extent of corruption or cronyism, the strength of property rights, and the degree of competition. The paper finds that weaknesses in these areas do affect the probability of firm exit largely in ways that undermine the Schumpeterian cleansing role of exit in raising overall productivity. Greater costs and regulatory burdens raise the probability that more productive firms exit, while less developed financial and legal institutions mitigate forces that would otherwise push less productive firms to exit. Thus, the more productive firms stand to gain the most from improvements in the investment climate, whether that is lowering transaction costs or improving market mechanisms. This holds both within countries and across countries. The impact of a particular investment climate measure can also differ significantly by type of firm, with the focus given to firm size. The differential impact on size can be significant at a size cutoff of 10 or more employees. As these are the firms that are near the threshold of many regulatory requirements, the implications are not just with regard to whether a firm remains in operation, but whether it does so in the formal sector.

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The Impact of the Investment Climate on Employment Growth : Does Sub-Saharan Africa Mirror Other Low-Income Regions?

2010-02-01, Aterido, Reyes, Hallward-Driemeier, Mary

Using survey data from 86,000 enterprises in 104 countries, including 17,000 enterprises in 31 Sub-Saharan African countries, this paper finds that average enterprise-level employment growth rates are remarkably similar across regions. This is true despite significant differences in the quality of the investment climate in which these enterprises operate. Objective measures of investment climate conditions (including the number of outages, the share of firms with bank loans, and others) indicate that conditions are most challenging within Sub-Saharan Africa, as well as for smaller enterprises. However, enterprises employment in Sub-Saharan Africa is less sensitive to changes in access to infrastructure and finance relative to other low-income regions. This can be understood by looking at non-linear effects by firm size -- and the finding that these size effects are particularly strong within Sub-Saharan Africa. Although unreliable infrastructure services and inadequate access to finance generally hamper growth, in Sub-Saharan Africa they are actually associated with higher employment growth rates among micro enterprises. Although employment growth is good news in Sub-Saharan Africa, that much of the expanded employment is in small, labor-intensive, less productive enterprises raises longer-run concerns about the efficiency of the allocation of resources and aggregate productivity growth in the region.

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Comparing Apples with....Apples : How to Make (More) Sense of Subjective Rankings of Constraints to Business

2009-09-01, Hallward-Driemeier, Mary

The use of expert or qualitative surveys to rank countries business investment conditions is widespread. However, within the economic literature there are concerns about measurement error and endogeneity based on characteristics of the respondents, raising questions about how well the data reflect the underlying reality they are trying to measure. This paper examines these concerns using data from 79,000 firms in 105 countries. The findings show that first, qualitative rankings correlate well with quantitative measures of the business environment, using both quantitative measures from within the survey and from external sources. Second, there are systematic variations in perceptions based on firm characteristics - focusing in particular on size and growth performance. However, it is not that an optimistic view of the business environment is simply the expression of a firm s own performance. Rather, firm size and performance affect the relative importance of certain constraints, particularly in areas such as finance, time with officials/inspectors, corruption, and access to reliable electricity. The results also show that much of the variation in subjective responses by firm types is largely due to differences in the objective conditions across firm types. There is little evidence that size and performance have non-linear effects in how constraining a given objective condition is reported to be. Overall, concerns about endogeneity remain in using business environment indicators to explain firm performance, but this stems primarily from the fact that who you are and how well you are doing can affect the conditions you face rather than whether the indicator used is qualitative or quantitative.

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Big Constraints to Small Firms’ Growth? Business Environment and Employment Growth across Firms

2009-08-01, Aterido, Reyes, Hallward-Driemeier, Mary, Pages, Carmen

Using data on more than 56,000 enterprises in 90 countries, this paper finds that objective conditions in the business environment vary substantially across firms of different sizes and that there are important non-linearities in their impact on employment growth. The paper focuses on four areas: access to finance, business regulations, corruption, and infrastructure. The results, particularly on the impacts of finance and corruption on growth, depend on whether and how the analysis accounts for the possible endogeneity of the business environment. Controlling for endogeneity revises the finding that small firms benefit most from access to finance, particularly for sources of finance associated with investment and growth. The findings are also sensitive to how small is defined. Differentiating micro (less than 10 employees) from other small firms shows that, while small firms can be disadvantaged in such an environment, micro firms tend to be proportionally less affected by a weak business climate and, on occasion, it can help them to grow. Overall, allowing different size classifications provides insights into the impact of the business environment that are lost in more aggregate analyses.

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Do Bilateral Investment Treaties Attract Foreign Direct Investment? Only a Bit ... and They Could Bite

2003-08, Hallward-Driemeier, Mary

Touted as an important commitment device that attracts foreign investors, the number of bilateral investment treaties (BITs) ratified by developing countries has grown dramatically. The author tests empirically whether BITs have actually had an important role in increasing the foreign direct investment (FDI) flows to signatory countries. While half of OECD FDI into developing countries by 2000 was covered by a BIT, this increase is accounted for by additional country pairs entering into agreements rather than signatory hosts gaining significant additional FDI. The results also indicate that such treaties act more as complements than as substitutes for good institutional quality and local property rights, the rationale often cited by developing countries for ratifying BITs. The relevance of these findings is heightened not only by the proliferation of such treaties, but by recent high profile legal cases. These cases show that the rights given to foreign investors may not only exceed those enjoyed by domestic investors, but expose policymakers to potentially large-scale liabilities and curtail the feasibility of different reform options. Formalizing relationships and protecting against dynamic inconsistency problems are still important, but the results should caution policymakers to look closely at the terms of agreements.

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Investment Climate and International Integration

2004-06, Dollar, David, Hallward-Driemeier, Mary, Mengistae, Taye

Drawing on recently completed firm-level surveys in Bangladesh, Brazil, China, Honduras, India, Nicaragua, Pakistan, and Peru, this paper investigates the relationship between investment climate and international integration. These standardized surveys of large, random samples of firms in common sectors reveal how firms experience bottlenecks and delays in hard infrastructure such as power and telecom as well as in soft infrastructure such as customs administration. The authors focus primarily on measures of the time or monetary cost of different bottlenecks (e.g., days to clear goods through customs, days to get a telephone line, sales lost to power outages). For many of these costs, the obstacles are lower in China than in the South Asian or Latin American countries. There is also systematic variation across cities within countries. The authors estimate a probit function for the probability that a randomly chosen firm is foreign-invested and a separate probit for the probability that a randomly chosen firm is an exporter. These measures of international integration are higher where investment climate is better. For locations to take advantage of opportunities in the international market, they need good infrastructure and a sound regulatory environment. The interaction of openness and sound investment climate creates a good environment for investment and production. This paper helps explain why China has been so successful over the past decade, both in terms of integration and of rapid growth, while other countries have had varied success.