author: Adams, S., & Atsu, F.
year: 2015
title: "Assessing the distributional effects of regulation in developing countries"
publisher: Journal of Policy Modeling
uri: https://doi.org/10.1016/j.jpolmod.2015.08.003
pubtype: article
discipline: economics

country: global
period: 1970-2012
maxlength:
targeting: implicit
group: developing countries
data: panel data

design: quasi-experimental
method: system general method of moments, fixed effects, OLS; using Gini coefficient
sample: 72
unit: country
representativeness: national
causal: 0 # 0 correlation / 1 causal

theory:
limitations: macro-level observations subsumed under region-level scale only
observation:
  - intervention: trade liberalization (FDI)
    institutional: 1
    structural: 0
    agency: 0
    inequality: income
    type: 0 # 0 vertical / 1 horizontal
    indicator: 1 # 0 absolute / 1 relative
    measures: Gini coeff
    findings: FDI unlikely to generate equity-oriented welfare effects; trade openness not significantly related
    channels: wrong targeting incentive structure for FDI
    direction: 1 # -1 neg / 0 none / 1 pos
    significance: 2 # 0 nsg / 1 msg / 2 sg
  - intervention: regulation (labour)
    institutional: 1
    structural: 0
    agency: 0
    inequality: income
    type: 0 # 0 vertical / 1 horizontal
    indicator: 1 # 0 absolute / 1 relative
    measures: Gini coeff
    findings: labour regulations and business regulations negatively related to equitable income distribution while credit market regulation has no effect in income distribution; FDI unlikely to generate equity-oriented welfare effects; trade openness not significantly related
    channels: regulatory policies often lack institutional capability to optimize for benefits; policies require specific targeting of inequality reduction
    direction: 1 # -1 neg / 0 none / 1 pos
    significance: 2 # 0 nsg / 1 msg / 2 sg
  - intervention: education (school enrolment)
    institutional: 1
    structural: 0
    agency: 0
    inequality: income
    type: 0 # 0 vertical / 1 horizontal
    indicator: 1 # 0 absolute / 1 relative
    measures: Gini coeff
    findings: school enrolment positively related to equitable income distribution
    channels: capacity-building for public administration practitioners; more context-adapted policies generated
    direction: -1 # -1 neg / 0 none / 1 pos
    significance: 2 # 0 nsg / 1 msg / 2 sg

notes: LM regulations defined as hiring/firing, minimum wage, severance pay; business reg. bureaucracy costs, business starting costs, licensing and compliance costs; credit market oversight of banks, private sector credit, interest rate controls
annotation: |
  A study on the effects of labour, business and credit regulations, FDI and school enrolment on the income inequality in developing countries from 1970 to 2012.
  It finds that in MENA, SSA, LAC and to some extend AP increased labour and business regulations are actually negatively related to equitable income distribution, with market regulation not having significant effects.
  Similarly, FDI is negatively related and the authors suggest it is unlikely to generate general welfare effects in developing countries as it often has the wrong targeting incentive structure.
  The authors identify developing countries lacking in institutional capability to accomplish regulatory policies optimized for benefits and see the need for policies requiring more specific targeting of inequality reduction as their agenda.
  On the other, they find school enrolment and thus education-oriented policies to be positively related with an equitable income distribution,
  suggesting it increases the capacity of public administration practitioners and in turn lead to more adapted policies specific to developing countries' institutional contexts.
  Overall, the authors suggest that regulatory policy in developing countries needs to be built for their specific contexts and not exported from developed countries due to their different institutional capabilities and structural makeup.
  The study is limited in its design focus that lying purely on the macro-level regional analyses and can thus, when finding correlations towards income inequality, also only identify far-reaching structural and institutional possible root causes.