The Ease of Doing Business Index as a Tool for Investment Location Decisions

The Ease of Doing Business Index (EDBI) uses 41 variables to compare the business environment of different countries. It is widely used by policy makers, researchers and multinational companies. This paper aims to assess EDBI’s consistency and validity in representing the business environment by using factor analysis. It is found that the EDBI presents a limited consistency and descriptive power of a country’s business environment. The consequence of these findings is that multinational firms should handle carefully the EDBI in their investment decisions.