Are Foreign Firms Privileged By Their Host Governments? Evidence From The 2000 World Business Environment Survey

This version: March 3, 2004 This draft is very preliminary and incomplete. Please do not quote or circulate. Comments are welcome. Abstract Using the data from World Business Environment Survey (WBES) on over 10,000 firms across eighty one countries, this paper finds significant regulatory advantages—as perceived by the firms themselves—enjoyed by foreign firms over domestic firms. The findings on regulatory advantages of foreign firms hold with a variety of alternative measures of regulations and with or without firmand country-level attributes and industry and country controls. There is also evidence that foreign firms’ regulatory advantages are especially substantial vis-à-vis the politically weak domestic firms. Furthermore, the regulatory advantages of foreign firms appear stronger in corrupt countries than in noncorrupt countries.