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Investment climate reforms and job creation in developing countries : what do we know and what should we do ?

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  • Rahman, Aminur

Abstract

This paper reviews the literature on the role of the investment climate reforms in job creation. It finds that the current landscape of employment and private sector activity in developing countries indicates a number of potential channels through which investment climate reforms can positively affect job creation. However, rigorous empirical evidence is scarce and most of the relevant studies focus on business entry reforms with a few focusing on business taxation and investment promotion activities. Overall, there is evidence of job creation through business entry, tax reforms, and investment promotion activity in developing countries. Almost all of these evidences are from quasi-experimental studies that are significant improvements over conventional cross-country or cross-section panel data analysis. Still, various endogeneity concerns in these studies cannot be ruled out completely. In assessing job effects, future research should provide deeper insights on the gross versus net and short-run versus long-run job effects and general equilibrium effects of various investment climate reforms related to jobs, productivity, competition, and other developmental outcomes. Another critical agenda for future research is to shed light on which investment climate reforms matter most for spurring the employment and productivity growth of firms in developing countries. The World Bank Group, in partnership with development partners and client government countries, can play a significant role in bridging the current knowledge gap by integrating rigorous evaluation as an integral part of project design and implementation, and improving data quality, particularly through its information and communication technologies-led private sector development reform initiatives.

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  • Rahman, Aminur, 2014. "Investment climate reforms and job creation in developing countries : what do we know and what should we do ?," Policy Research Working Paper Series 7025, The World Bank.
    • Handle: RePEc:wbk:wbrwps:7025
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    File URL: https://documents.worldbank.org/curated/en/557481468327585076/pdf/WPS7025-REPLACEMENT-Investment-Climate-Reforms-and-Job-Creation-in-Developing-Countries-What-Do-We-Know-and-What-Should-We-Do.pdf
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    2. Garsous, Grégoire & Corderi, David & Velasco, Mercedes, 2015. "Tax Incentives and Job Creation in the Tourism Industry of Brazil," IDB Publications (Working Papers) 7324, Inter-American Development Bank.
    3. Garsous, Grégoire & Corderi, David & Velasco, Mercedes & Colombo, Andrea, 2017. "Tax Incentives and Job Creation in the Tourism Sector of Brazil’s SUDENE Area," World Development, Elsevier, vol. 96(C), pages 87-101.
    4. Kudakwashe, Chinyanganya & Regret, Sunge, 2021. "Growth Effects of Foreign Direct Investments in Zimbabwe: Do Sources Matter?," African Journal of Economic Review, African Journal of Economic Review, vol. 9(4), September.
    5. Segundo Camino‐Mogro, 2023. "Tax incentives, private investment and employment: Evidence from an Ecuadorian reform," Journal of International Development, John Wiley & Sons, Ltd., vol. 35(7), pages 2129-2156, October.
    6. Reeg, Caroline, 2015. "Micro and small enterprises as drivers for job creation and decent work," IDOS Discussion Papers 10/2015, German Institute of Development and Sustainability (IDOS).

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    Keywords

    Educational Populations; Education for Development (superceded); Education For All;
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