Summary
Comparing regulations across countries is difficult because information about individual regulatory provisions is scarce and often qualitative in nature. In addition, much of the impact of regulation is not due to the actual law itself, but rather how it is enforced and implemented by the government.
However, quantitative comparisons across countries are valuable for several reasons. While theory can tell us much about the relationship between regulation and key macroeconomic variables, to avoid ambiguity we need to be able to estimate these relationships empirically. Also, cross-country comparisons enable policy makers to situate their country across the range of possible regulatory regimes and infer the economic consequences of different regulatory choices. In addition, the ability to benchmark current regulation and alternative policy options against the regulatory approaches of other countries has proven useful in encouraging countries to implement structural reforms that enhance economic performance.
If we want to use these surveys in debates, it is important that we understand them, and realise their limitations. This paper attempts to shed some light on certain key surveys by discussing their results and methods.
Methods drive results; the results can depend on where data come from and how they are built into the scoring and ranking. There are two types of surveys—“subjective” surveys based on the opinions of business executives, and “objective” surveys based on collecting information from various sources, often published ones. The surveys employ different weighting schemes to form overall indices of regulation from the underlying data. But there is usually a rough agreement between different survey results: countries occupy roughly the same position in different rankings when looking at particular impacts.
The surveys typically only measure the negative impacts of regulations and do not include any benefits associated with the regulatory impacts, nor how effective the regulations are at achieving their stated policy objectives. The main focus is on measuring the ease of doing business and whether regulation is hindering the competitiveness of the national economy.
New Zealand is, generally speaking, rated highly in these surveys. That is, businesses, and the wider economy, bears a low regulatory cost relative to other countries. This is especially so in areas like domestic markets, which are perceived to be contestable to foreign competitors and in which regulations have relatively little effect on prices. On the other hand, New Zealand is ranked lower with regard to foreign ownership restrictions and environmental regulations. In some cases—for example, the labour market—there appears to be some contradiction between what the surveys are telling us.
