Publication: Rules and Regulations, Managerial Time and Economic Development
Loading...
Date
2024-05-06
ISSN
Published
2024-05-06
Author(s)
Editor(s)
Abstract
This paper documents that senior plant managers in less-developed countries spend more time dealing with government rules and regulations than their counterparts in richer countries. These facts are interpreted through the lens of a span-of-control growth model, in which top managers run heterogeneous production plants, employing middle managers as well as production workers. The model implies that increasing the time burden on top management leads to equilibrium changes in wages, occupational sorting, the size distribution of production plants and ultimately, to a reduction in aggregate output. These consequences hold even when the time burden is symmetric across all plants. Quantitative results show that increasing the burden on managers’ time from the levels observed in Denmark to the higher levels observed in poorer countries have substantial consequences. Imposing the average time spent on regulations in Argentina reduces aggregate output by about 1/3 and mean plant size by more than 5 employees. Results contribute to rationalizing differences in plant size and output across countries via a channel hitherto unexplored in the literature.
Link to Data Set
Citation
“Tamkoç, M. Nazim; Ventura, Gustavo. 2024. Rules and Regulations, Managerial Time and Economic Development. Policy Research Working Paper; 10761. © World Bank. http://hdl.handle.net/10986/41501 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication The Future of Poverty(Washington, DC: World Bank, 2025-07-15)Climate change is increasingly acknowledged as a critical issue with far-reaching socioeconomic implications that extend well beyond environmental concerns. Among the most pressing challenges is its impact on global poverty. This paper projects the potential impacts of unmitigated climate change on global poverty rates between 2023 and 2050. Building on a study that provided a detailed analysis of how temperature changes affect economic productivity, this paper integrates those findings with binned data from 217 countries, sourced from the World Bank’s Poverty and Inequality Platform. By simulating poverty rates and the number of poor under two climate change scenarios, the paper uncovers some alarming trends. One of the primary findings is that the number of people living in extreme poverty worldwide could be nearly doubled due to climate change. In all scenarios, Sub-Saharan Africa is projected to bear the brunt, contributing the largest number of poor people, with estimates ranging between 40.5 million and 73.5 million by 2050. Another significant finding is the disproportionate impact of inequality on poverty. Even small increases in inequality can lead to substantial rises in poverty levels. For instance, if every country’s Gini coefficient increases by just 1 percent between 2022 and 2050, an additional 8.8 million people could be pushed below the international poverty line by 2050. In a more extreme scenario, where every country’s Gini coefficient increases by 10 percent between 2022 and 2050, the number of people falling into poverty could rise by an additional 148.8 million relative to the baseline scenario. These findings underscore the urgent need for comprehensive climate policies that not only mitigate environmental impacts but also address socioeconomic vulnerabilities.Publication Central Bank Independence and Sovereign Borrowing(Washington, DC: World Bank, 2025-07-25)This paper studies the impact of central bank independence on sovereign borrowing, using an index that captures institutional constraints on central bank lending to the government across 155 countries from 1972 to 2023. The findings show that tighter lending to the executive significantly reduces sovereign interest rates and raises the debt-to-gross domestic product ratio in developing countries. These effects reflect the executive’s improved ability to borrow at lower costs under greater central bank independence. The results are robust to multiple tests, but there are no significant effects in advanced economies. From a policy perspective, the results highlight the key role of independent central banks as catalysts for reducing governments’ borrowing costs and enhancing the government’s borrowing capacity.Publication Disentangling the Key Economic Channels through Which Infrastructure Affects Jobs(Washington, DC: World Bank, 2025-04-03)This paper takes stock of the literature on infrastructure and jobs published since the early 2000s, using a conceptual framework to identify the key channels through which different types of infrastructure impact jobs. Where relevant, it highlights the different approaches and findings in the cases of energy, digital, and transport infrastructure. Overall, the literature review provides strong evidence of infrastructure’s positive impact on employment, particularly for women. In the case of electricity, this impact arises from freeing time that would otherwise be spent on household tasks. Similarly, digital infrastructure, particularly mobile phone coverage, has demonstrated positive labor market effects, often driven by private sector investments rather than large public expenditures, which are typically required for other large-scale infrastructure projects. The evidence on structural transformation is also positive, with some notable exceptions, such as studies that find no significant impact on structural transformation in rural India in the cases of electricity and roads. Even with better market connections, remote areas may continue to lack economic opportunities, due to the absence of agglomeration economies and complementary inputs such as human capital. Accordingly, reducing transport costs alone may not be sufficient to drive economic transformation in rural areas. The spatial dimension of transformation is particularly relevant for transport, both internationally—by enhancing trade integration—and within countries, where economic development tends to drive firms and jobs toward urban centers, benefitting from economies scale and network effects. Turning to organizational transformation, evidence on skill bias in developing countries is more mixed than in developed countries and may vary considerably by context. Further research, especially on the possible reasons explaining the differences between developed and developing economies, is needed.Publication Crowding Out and Banking Crises(Washington, DC: World Bank, 2025-07-22)This paper studies the effect of government issuance on firm issuance during banking crises using transaction-level bond and loan data from 66 countries between 1991 and 2017. Governments rarely issue loans, preferring to issue in bond markets. In contrast, firms receive most of their financing from banks. During banking crises, as the supply of domestic loans decreases, firms switch to issuing bonds in domestic markets. The paper uses a novel instrument based on maturing debt to overcome the potential endogeneity of government issuance. The findings show that firms must compete with the government for funds in the domestic bond market and are crowded out from this market as a result. This happens not only in developing countries, but in advanced countries as well. The paper also shows that firms with the ability to tap international debt markets switch to these markets when crowding out occurs in domestic bond markets. Lastly, the paper shows that more developed domestic bond markets mitigate, but do not eliminate, the degree to which crowding out occurs.Publication Designing and Analyzing Powerful Experiments(Washington, DC: World Bank, 2025-07-22)This paper offers practical advice on how to improve statistical power in randomized experiments through choices and actions researchers can take at the design, implementation, and analysis stages. At the design stage, the choice of estimand, choice of treatment, and decisions that affect the residual variance and intra-cluster correlation can all affect power for a given sample size. At the implementation stage, researchers can boost power through increasing compliance with treatment, reducing attrition, and improving outcome measurement. At the analysis stage, power can be increased through using different test statistics or estimands, through the choice of control variables, and through incorporating informative priors in a Bayesian analysis. A key message is that it does not make sense to talk of “the” power of an experiment. A study can be well-powered for one outcome or estimand, but not others, and a fixed sample size can yield very different levels of power depending on researcher decisions.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Fading Away Informality by Development(Washington, DC: World Bank, 2024-10-25)This paper focuses on the role of development in informality through higher wages and expanded production possibilities. First, it uses informal, plant-level survey data across countries to document that on average, richer countries have smaller informal, unregistered plants in terms of employment. This negative relationship holds even after controlling for plant-level characteristics. Then, a dynamic general equilibrium model with incomplete tax enforcement is developed such that formal and informal plants coexist in equilibrium. The model allows for two groups of agents operating in the informal sector: those with lower abilities than workers, and those with abilities falling between workers and formal managers. In the model, when plants become more productive, some agents operating informally choose to be workers and some of them transition into formality due to higher wages and better production possibilities, which decreases the mean size of informal plants. The quantitative results indicate that around 30 percent of the increase in aggregate output due to higher productivity is associated with a roughly one-quarter decline in the mean size of informal plants.Publication Informality and the Life Cycle of Plants(Washington, DC: World Bank, 2025-01-09)This paper documents the life cycle of formal and informal plants using five waves of the Mexican establishment census. Formal plants begin operations with three times more workers than informal plants and exhibit faster growth rates. Throughout their life cycle, formal establishments more than double their size, while informal plants increase their size by only 77%. A general equilibrium model is developed to quantify the aggregate economic losses stemming from these growth rate disparities. In the model, plants grow through productivity investments, and informality emerges from incomplete enforcement. In equilibrium, informal plants exhibit flatter life cycle profiles to avoid detection and taxation. Model parameters are calibrated to match key properties of plant size distribution and the life cycle of plants in Mexico. Quantitative results indicate that a revenue-neutral full enforcement increases aggregate output and the overall growth rate by sixteen and twenty-five percent relative to the benchmark, respectively.Publication Bribery, Plant Size and Size Dependent Distortions(World Bank, Washington, DC, 2022-09)This paper studies the relationship between distortions, plant size, and bribery possibilities. In a distorted economy, bribery is a transfer from a private party to government officials to ‘get things done’. Enterprise Surveys data shows that small plants spend a higher fraction of their output on bribery than big plants. In this paper, a one-sector growth model is developed in which size-dependent distortions, bribery opportunities, and different plant sizes coexist. In the model, bribery is endogenous in the sense that managers decide to use it as a way to deal with distortions. Two sets of exercises are conducted to quantify the interplay of size-dependent distortions and bribery. First, the model parameters are calibrated to generate the plant size distribution of the U.S., by assuming the U.S. is free of distortions. Then, size-dependent distortions are introduced to the undistorted economy, and their effects with and without bribery opportunities are compared. Counterfactual exercises show that size-dependent distortions become less distortionary in the presence of bribery opportunities since plants are able to avoid distortions by paying larger bribes. Second, the model is calibrated with distortions and bribery opportunities using Turkish data. The choice of this country for analysis does not imply that bribery or size-dependent distortions are particularly large in Türkiye relative to countries of comparable development. The choice is driven by the availability of data on both the plant size distribution and spending on bribery in the country. The results indicate that the inferred level of distortions is sizable for all plants. The removal of distortions, which would eliminate the incentive for paying bribes, can have a substantial effect on both the output and the mean plant size which could increase by 63.6 and 82.5 percent, respectively.Publication Labor Market Regulations : What Do We Know about Their Impacts in Developing Countries?(World Bank, Washington, DC, 2014-03)Labor market regulation is a high-profile, and often contentious, area of public policy. Although these regulations have been studied most extensively in developed countries, there is a growing body of literature on their effects in developing countries. This paper reviews that literature and focuses on the impacts of two important types of labor market regulation, minimum wages and employment protection legislation (EPL), on employment, earnings, and productivity. Strong and opposing views exist regarding the costs and benefits of these regulations, but the results of this review suggest that their impacts are generally smaller than the heat of the debates would suggest. Efficiency effects are found sometimes, but not always, and the effects can be in either direction and are usually modest. The distributional impacts of both minimum wage and employment protection legislation are clearer, with two effects predominating: an equalizing effect among covered workers, but with groups such as youth, women, and the less skilled disproportionately outside the coverage and its benefits. Although the overall conclusion is one of modest effects in most cases, the policy implication is not that these regulations do not matter. On the one hand, both minimum wages and EPL can affect distributional objectives. On the other hand, these regulations can generate undesirable economic or social impacts if they are established or operate in ways that exacerbate the labor market imperfections that they were designed to address.Publication Egypt : Development of a Load Management Program and Design of Time of Use/Seasonal Pricing(world Bank, Washington, DC, 2008-09)The primary aim of load shifting or peak clipping is to lower the peak demand of the electricity system as a whole or for key parts of the network and thereby to reduce the need for investment in generation and transmission capacity and to lower electricity supply costs. The pricing mechanisms and contractual frameworks examined in the project include conventional Time Of Use (TOU) tariffs that vary by season, day of the week or time of the day as well as special TOU contracts (contracts with large consumers to adjust their regular maintenance activities and/or major annual maintenance), interruptible contracts, and TOU power purchase contracts (purchase of electricity from customers who have excess self-generation). This Final Report is structured as follows; Section 2 provides an overview of the process of TOU tariff setting and rate design, Sections 3 and 4 summarise the experience of TOU tariffs and load management contracts in the MENA region (Section 3) and internationally (Section 4), Section 5 summarises the methodologies used in the development of TOU pricing mechanisms and load management contracts, Section 6 describes the marginal costs which are a key driver of the tariff designs, Section 7 presents the analysis of the demand response to TOU tariffs, Section 8 describes the design of the conventional TOU tariffs, Section 9 discusses special TOU contracts, Section 10 describes the design of interruptible contracts, Section 11 describes the design of TOU power purchase contracts, Section 13 describes the implementation plan for TOU pricing and loadmanagement contracts, there are also annexes providing supporting information and analysis
Users also downloaded
Showing related downloaded files
Publication Classroom Assessment to Support Foundational Literacy(Washington, DC: World Bank, 2025-03-21)This document focuses primarily on how classroom assessment activities can measure students’ literacy skills as they progress along a learning trajectory towards reading fluently and with comprehension by the end of primary school grades. The document addresses considerations regarding the design and implementation of early grade reading classroom assessment, provides examples of assessment activities from a variety of countries and contexts, and discusses the importance of incorporating classroom assessment practices into teacher training and professional development opportunities for teachers. The structure of the document is as follows. The first section presents definitions and addresses basic questions on classroom assessment. Section 2 covers the intersection between assessment and early grade reading by discussing how learning assessment can measure early grade reading skills following the reading learning trajectory. Section 3 compares some of the most common early grade literacy assessment tools with respect to the early grade reading skills and developmental phases. Section 4 of the document addresses teacher training considerations in developing, scoring, and using early grade reading assessment. Additional issues in assessing reading skills in the classroom and using assessment results to improve teaching and learning are reviewed in section 5. Throughout the document, country cases are presented to demonstrate how assessment activities can be implemented in the classroom in different contexts.Publication Digital-in-Health(Washington, DC: World Bank, 2023-08-18)Technology and data are integral to daily life. As health systems face increasing demands to deliver new, more, better, and seamless services affordable to all people, data and technology are essential. With the potential and perils of innovations like artificial intelligence the future of health care is expected to be technology-embedded and data-linked. This shift involves expanding the focus from digitization of health data to integrating digital and health as one: Digital-in-Health. The World Bank’s report, Digital-in-Health: Unlocking the Value for Everyone, calls for a new digital-in-health approach where digital technology and data are infused into every aspect of health systems management and health service delivery for better health outcomes. The report proposes ten recommendations across three priority areas for governments to invest in: prioritize, connect and scale.Publication World Development Report 2006(Washington, DC, 2005)This year’s Word Development Report (WDR), the twenty-eighth, looks at the role of equity in the development process. It defines equity in terms of two basic principles. The first is equal opportunities: that a person’s chances in life should be determined by his or her talents and efforts, rather than by pre-determined circumstances such as race, gender, social or family background. The second principle is the avoidance of extreme deprivation in outcomes, particularly in health, education and consumption levels. This principle thus includes the objective of poverty reduction. The report’s main message is that, in the long run, the pursuit of equity and the pursuit of economic prosperity are complementary. In addition to detailed chapters exploring these and related issues, the Report contains selected data from the World Development Indicators 2005‹an appendix of economic and social data for over 200 countries. This Report offers practical insights for policymakers, executives, scholars, and all those with an interest in economic development.Publication Argentina Country Climate and Development Report(World Bank, Washington, DC, 2022-11)The Argentina Country Climate and Development Report (CCDR) explores opportunities and identifies trade-offs for aligning Argentina’s growth and poverty reduction policies with its commitments on, and its ability to withstand, climate change. It assesses how the country can: reduce its vulnerability to climate shocks through targeted public and private investments and adequation of social protection. The report also shows how Argentina can seize the benefits of a global decarbonization path to sustain a more robust economic growth through further development of Argentina’s potential for renewable energy, energy efficiency actions, the lithium value chain, as well as climate-smart agriculture (and land use) options. Given Argentina’s context, this CCDR focuses on win-win policies and investments, which have large co-benefits or can contribute to raising the country’s growth while helping to adapt the economy, also considering how human capital actions can accompany a just transition.Publication World Bank Annual Report 2024(Washington, DC: World Bank, 2024-10-25)This annual report, which covers the period from July 1, 2023, to June 30, 2024, has been prepared by the Executive Directors of both the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA)—collectively known as the World Bank—in accordance with the respective bylaws of the two institutions. Ajay Banga, President of the World Bank Group and Chairman of the Board of Executive Directors, has submitted this report, together with the accompanying administrative budgets and audited financial statements, to the Board of Governors.