ASU undergrads help produce first-of-its-kind report on business rules

Wednesday, October 9, 2019

A team of undergraduate researchers at Arizona State University spent a year mining and analyzing data to produce a first-of-its-kind report that ranks 115 cities in three countries on how easy it is to start a business.

“Doing Business North America,” a wide-ranging comparison of six types of business regulations in Canada, Mexico and the United States, was released today by the Center for the Study of Economic Liberty, a joint endeavor of the W. P. Carey School of Business and the School of Civic and Economic Thought and Leadership.

The project, based on the World Bank’s “Doing Business” report, involved a dozen undergraduates in different disciplines led by Steven Slivinski, senior research fellow and project director at the center.

The students pored over data sets and websites, collecting information such as the laws covering maternity leave, how many steps it takes to get the power turned on and how high the tax rate is. For example, it can take more than two months to complete the procedures required to open a business in Little Rock, Arkansas, compared with four days in San Pedro, Mexico.

“'Doing Business North America' is predicated on the idea that a well-functioning economy requires good rules,” said Ross Emmett, director of the Center for the Study of Economic Liberty. “The ease of doing business in a location is higher when the rules are clear and the steps involved are few. A study like this is useful for policy research in both the academic and the policymaker communities.”

Among the 115 cities evaluated, Oklahoma City ranked first in overall ease of doing business. Phoenix came in at No. 20, scoring 80.52 out of 100.

Slivinski said that a lot of research compares business regulations between states and countries, including the World Bank report, but there are no city-to-city comparisons.

“So we instantly realized there was an opportunity here to go deeper,” he said. “That’s where a lot economic activity happens. It’s where people live.”

Besides the overall score, the team measured six other categories: starting a business, employing workers, getting electricity, registering property, paying taxes and resolving insolvency. All of the data will be available for download by the public.

“We wanted to make sure we had a data set that was robust to help researchers and policy makers understand the differences between places and the benefits that come with certain ways of doing things and disadvantages of doing it other ways,” Slivinski said.

“This is something that could only have been done at a place like ASU, where we have good students to choose from, we have this interdisciplinary approach where we can draw from different schools, and we think in a broader policy context.

“This goes beyond business. It goes to quality of life in an area.”

The research started in April 2018, when the team looked at the World Bank report and decided how to expand on it.

"They only did five cities in North America and the two they chose in the U.S. were New York and LA, which are not representative citites," he said.

The World Bank report includes many countries, some with developing economies. So some of the variables it measures, like barriers to women owning property and the likelihood of power outages, could be discarded.

Politics can play a role too.

“The World Bank can get pressure from member countries if a country doesn’t like its ranking,” Slivinski said. “This was a refreshingly academic endeavor. We wanted to plunge into the collection and find out what we could.”

Celeste Karlsrud, a senior in the School of Sustainability, was on the team of 12 student workers and enjoyed collecting the data.

“It was interesting to look at things like maternity leave and how many sick days were allowed. I liked getting down to the nitty-gritty public policy of it,” she said.

“We would dive into research papers and go through websites, and then we had to compare different kinds of resources. That’s when we would get together to go over what was relevant, or made sense or answered our questions.”

Paul Bernert, a research technician in the center, said the project had to start from scratch.

“There was no framework for how to collect data or what was in the realm of possibility,” he said. “Not only did we collect the data, but we had to come up with the system for how we actually ranked the cities. We had inspiration from the World Bank, so it’s an adaptation of what they did.”

The project is funded for several years by a donor, so the team will soon begin work on next year’s report, which Slivinski hopes will include more categories.

Nicholas McCrossan, a senior majoring in supply chain management and finance, helped to collect data and then create the ranking system.

“We had to look at things like, if you can find information online and file online or if you have to show up in person,” he said. “Then I helped to design the categories, making sure we could find all the information we needed.”

The category “employing workers” includes requirements such as minimum wage, paid annual leave and severance pay. Higher-scoring cities had lower or no requirements for those benefits. Slivinski said that “regulations on employing workers” also could be viewed as “worker protections.”

“I predict some of the cities that score low on this would say, ‘We disagree with your assumptions,’” he said.

“The best part about this is that because the data is being publicly released, they can take it and flip all the defaults and say, ‘We don’t think we should be marked down on that. We should be marked up.’

“That’s absolutely within the realm of what’s possible and what we hope people do with this.”

Top image: Phoenix was among the 115 cities ranked. The category rankings for Phoenix: starting a business, 40th; employing workers, 46th; registering property, seventh; getting electricity, seventh; paying taxes, 32nd. For “resolving insolvency,” all American cities tied for first, followed by Canadian cities and then Mexican cities. Photo by Deanna Dent/ASU Now