Impact of business

environment on poverty reductionGessye Ginelle Safou-Mat

gs8874b@american.eduAmerican University

School of International Service

Research Question & Research hypothesis

• Research Question/s • Impact of the state of the business

environment on poverty reduction.

• Research hypothesis/hypothesesHa: Controlling for literacy rate, ease of doing business ranking is negatively correlated with human development index.

Background Info or Lit. Review• Theory and findings form paper #1: United Nations

Research Institute on Social Development (UNRISDo Theory: link between business and poverty reductiono Findings :Complex relationship, Poverty can badly affect businesses and

business can affect poverty either positively or negatively

• Theory and findings form paper #2: World Bank Doing Business and Tawoseo Theory: Enterprises effective vehicles to industrial development, employment,

income generation and poverty reductiono Findings :Ease of doing business is positively correlated to more jobs.

• Theoretical and/or empirical gap/s in the existing literatureo Theoretical gap/s: Are more businesses causing poverty or is poverty

restraining business development ( foreign investment) in a country? o Empirical gap/s: no extensive research available on this topic, does ease of

doing business really help reduce poverty?

Data• Unit of analysis/study : country• Source of the data: World Bank Doing Business 2012, UNDP

2010 HDI Index, World Bank data literacy rate 2010• Reliability of the data: large number of observations (178

countries max and 96 min), p value = 0.000<0.05, however data taken from different years (2010 for HDI and LIT and 2012 for EDB), still reliable as business environment and HDI do not change overnight.

• Dependent variable/so Y is Human Development Index (HDI)o Unit of measurement and LOM of Y variable : expressed from 0 to 1, 1 being the perfect

Human Development Index and 0 representing the worse country in terms of HDI. LOM is Interval Ratio

• Independent Variableo X1 is Ease of Doing Business (EDB); Units is ranking, number 1 representing the best

ranking and LOM of EDB is Ordinalo X2 is Literacy rate (LIT); Units is percentage from 0 to 1 and LOM of LIT variable is Interval

Ratioo X3 is GDP; Units is income in terms of dollars and LOM of is Interval Ratio

Descriptive Statistics Table or/and Graphics• Central tendency of dependent/independent variables:

o The mean/median (for I-R LOM dependent variable) represent the typical/central score. The mean is highly sensitive to extreme scores whilst the median is not or the mode (for Nominal or Ordinal LOM variables) represents the most common score.

o My dependent variable HDI has normal uni-modal distribution

• The central tendency for HDI is not very much credible as there is clearly a different mode, mean and median.

• Dispersion of dependent/independent variables:o HDI: Little dispersion, Standard Deviation is equal to 0.17o EDB: Large dispersion, range is equal to 188o LIT: Little dispersion, Standard Deviation is equal to 5.12o GDP:Very Large dispersion, Standard Deviation is equal to 17503.6

• Do you have missing data: Yes, EDB for 2010 unavailable. Regression for HDI, EDB, LIT and GDP together finds only 94 countries available when individually HDI has 175 countries, EDB 178, LIT 96 and GDP 174 countries.

• Visualize the distribution (central tendency and dispersion) of your dependent/independent variables

DESCRIPTIVE STATISTICS

01

23

Dens

ity

.2 .4 .6 .8 1Human Development Index 2010

Source: HDI 2010, UNDP

Histogram of HDIStats HDI

2010EDB LIT GDP Unpl

N 175 178 96 174 91

Mean 0.67 94.53 83.88 12438 8.61

SD 0.17 54.57 5.12 17504 5.12

P50 0.71 93.5 7.5 4845.2

7.5

iqr 0.27 93 5.8 12662 5.8

Min 0.29 1 0.4 211 0.4

Max 0.95 189 27.2 103574

27.2

Cv 0.26 0.58 0.59 1.41 0.59

Bivariate analysis - I-R LOM dependent variable

HDI 2010 Research hypothesis

EDB Pearson’s r=-0.78(0.000), N=175

Reject the H0. HDI and EDB are strongly negatively correlated

LIT Pearson’s r=0.82(0.000), N=96

Reject the H0. HDI and LIT are strongly positively correlated

lGDP Pearson’s r=0.93(0.000), N=172

Reject the H0. HDI and GDP are strongly positively correlated

UNPL Pearson’s r=0.14(0.000), N=90

Reject the H0. HDI and UNPL are weakly positively correlated

.2.4

.6.8

1

0 50 100 150 200ease of doing business all

Fitted values HDI2010lowess HDI2010 edb_all

HDI vs. Ease of Doing Business

Regression Analysis, OLS (Probit marginal Effects)

Estimates, The Dependent Variable is ….

Model 1

Model 2 Model 3

X1(Sign.,

p)

0.11(.00)

0.11(.00)

X2

-123.45(.04)

-123.45(.04)

X3 .01(.09 )

NAdj. R2

1890.67

1890.65

Interpretations:i)Does the association, i.e. is your coefficient statistically significant? Look this value. Is it <.05?

ii) If the association/correlation exists (sig <.05), what is the direction of the association/correlation, i.e. . What is the sign of the coefficient? iii) interpret the value of each and every statistically significant coefficient. For example, if the dependent and independent variables are not in log-level, and if b1=0.11, we can interpret this coefficients in the following way “one unit change in the independent variable X1 leads to 0.11 units changes in the dependent variables Y.” You can not interpret values of coefficients that are not significant since they are statistical zeros. iv) Make sure you interpret adj. R square statistics.

Model 1 Model 2 Model 3 Model 4

Edb -0.0025(0.00)

-0.0012(0.00)

-0.0006(0.00)

0.0001(0.31)

Lit 0.0059(0.00)

0.0031(0.00)

0.0033(0.00)

Lgdp 0.0695(0.00)

0.0770(0.00)

Unpl 0.0014(0.11)

NAdj. R2

1750.603

960.768

940.908

460.942

Regression Analysis, OLS Estimates, The dependent variable is Human Development Index

(Sign., p)

Findings & Policy Implications of

the research• Findings: Did you accept your research

hypothesis?o Finding #1o Finding #2

• What are the policy implications of your findings?