Chart of the Week #3: Why the World Bank Should Ditch the “Doing Business” Rankings—in One Embarrassing Chart
Source: Center for Global Development
January 18, 2018
Justin Sandefur and Divyanshi Wadhwa
Last week the World Bank’s Chief Economist, Paul Romer, told the Wall Street Journal the Bank had manipulated its own competitiveness rankings to undermine Chile’s socialist government, and hinted Chile might not be alone—then he retracted the claim. Romer’s conspiracy theories probably aren’t credible, but neither are the Doing Business numbers.
The Doing Business index is one of the World Bank’s highest profile publications, ranking countries on the ease of registering property, paying taxes, and clearing other regulatory hurdles. The Bank boasts that countries often design reform programs specifically to improve their rankings, and Rwanda has a whole ministry devoted to that purpose. Clearly, the Doing Business indicators carry some weight.
So when Paul Romer, the World Bank chief economist and a perennial contender for the Nobel Prize, told the Wall Street Journal that he had lost faith in “the integrity” of the process behind the numbers, people took notice (see the New York Times, Bloomberg, Mother Jones, Quartz, etc.).
Chile’s peculiar fall and rise and fall again
Romer hinted at a political conspiracy. “I want to make a personal apology to Chile,” he said. Questionable methodological changes had caused Chile’s ranking to plummet when socialist president Michelle Bachelet was in office, rise again under her conservative successor Sebastián Piñera, then turn around and fall again when Bachelet came back to power in 2010— all due to methodological tinkering and almost no underlying changes in Chile’s actual laws or policies.
To illustrate Romer’s point, we went back and compared the official rankings published by Doing Business with our own attempt to re-create rankings using a consistent sample of countries and methodology from 2006 through 2018. (First we compiled the older Doing Business rankings from PDFs, as they’ve been conspicuously expunged from the historical data on the Doing Business website. And then we downloaded the indicator-by-indicator data from Doing Business to create our own fixed-methodology rankings. The full data and code are linked at the bottom of this post.)