Measuring the Enabling Environment: What Works, and What’s Missing?
This post is the second installment of the Feed the Future Enabling Environment for Food Security (EEFS) project’s examination of the Feed the Future Learning Agenda. Drawing on over four years of EEFS’ lessons learned and looking ahead to upcoming analytical product development, the series shares an evidence-based perspective on the role of the enabling environment in building competitive, inclusive, resilient, nutrition-sensitive agricultural market systems to support countries’ Journey to Self-Reliance. You can read the series’ first post here.
Feed the Future Learning Agenda Question:
Policy Systems — Measuring Progress: What are effective approaches to measuring gains that lead to good policy outcomes?
A widely used method for measuring the enabling environment has been index-based benchmarking, which assesses national or subnational contexts against various expected enabling environment conditions. Each variable — or category of variables — is typically given a score based on structured survey results, and scores are aggregated for an overall ranking. Each operating context can be compared against other operating contexts and/or against past time periods within the same operating context.
One of the more well-known of these tools is the World Bank’s Doing Business Index, which measures and ranks the costs of doing business as a result of the regulatory environment. The World Bank also introduced a similar tool, the Enabling the Business of Agriculture Index, which also aims to understand the regulatory environment but with a particular focus on factors affecting agribusinesses.
Recently, the EEFS project published two novel indexing resources relevant to agricultural enabling environments: the Intra-African Agriculture Trade Improvement Scorecards, which compile various elements known to support a well-functioning trade system, and the Water Governance Scorecard, which summarizes key legal/regulatory and institutional gaps in Feed the Future priority countries’ water systems for agricultural use.
What does benchmarking do well, and how does it support policy outcomes?
Measuring progress towards expected outcomes requires evidence within a context over time as well as across contexts to compare and contrast results. The utility of the aforementioned tools, and the benchmarking approach generally, is that policymakers are able to see how the formal rules within an enabling environment compare to other countries, and how they are progressing against other countries over time.
Proponents of existing benchmarking tools highlight how the ranking results often incentivize countries to pursue enabling environment reforms if they see that they are lagging behind their peers. Encouraging policymakers’ pursuit of market-oriented reforms is an important accomplishment that should not be underestimated or ignored.
What has benchmarking not done well, and what is missing?
It is necessary to recognize, however, that many index-based benchmarking tools only measure the existence or absence of formal rules in the enabling environment. In other words, they tell policymakers whether the legal/regulatory and institutional factors that are expected to lead to good outcomes are in place. They do not typically measure the enforcement of those rules or generally the performance of the system (e.g., the outcomes from the rules).
For example, a formal rule that is often measured in traditional benchmarking tools is the time and cost necessary to obtain a license to operate a business or to export/import a product. But where rent seeking behavior by regulators — at border points or storefronts — is a common occurrence, the possession of formal licensing documents may be a moot point for many small market actors.
As this example demonstrates, the existence of formal rules and institutions may or may not reflect whether the outcomes in complex market systems — particularly least developed ones — are as expected based on experiences in more developed contexts. So while index-based benchmarking tools which measure the existence of formal rules and institutions are necessary, they are arguably insufficient.
Identifying underlying variables: the informal rules that affect policy outcomes
Whether rules are enforced consistently and impartially will drastically influence the effectiveness of those rules and their outcomes. While enforcement of a rule may be a function of institutional capacity and resource availability, it may also (or alternatively) be a function of myriad political economy factors — that is, the informal incentives for regulators to carry out a particular rule. (EEFS has previously discussed the merits of Political Economy Analysis to better understand the enabling environment here and here.)
The political economy of a complex market system does not exist in a vacuum. Since political and market systems are social constructs, the incentives of actors within these systems, and their actions, are often at least partly the manifestation of prevailing norms and traditional values in a particular context. Where a formal rule runs counter to the norms and traditional values within a system, or if a rule was put in place as a result of external influence rather than internal dynamics, the likelihood of enforcement at all levels is diminished.
Recognizing these challenges, EEFS has embarked upon the development of an analytical framework which seeks to identify underlying variables — informal norms and traditional values — within a system influencing entrepreneurial decisions and outcomes. For instance, factors such as group loyalty, culture of patronage, social obligation, biases toward wealth creation versus wealth extraction, perceptions of opportunity, sources of motivation, and many other concepts will dictate whether entrepreneurs choose to start and grow a business, and whether the participation in and distribution of gains from investments will be broad-based (inclusive) or narrow (exclusive).
We hope that the framework will complement various existing index-based benchmarking tools that examine the formal rules and institutions within market system enabling environments. More broadly, the framework will seek to provide a practical approach for USAID, development practitioners, and policymakers to consider under-examined variables that, if left unaddressed, may hinder efforts to achieve competitive, inclusive, resilient outcomes from private sector engagement.
Stay tuned for more on this analytical framework for informal rules in the coming months!
Feed the Future, “The Feed the Future Learning Agenda,” Agrilinks, September 2018, https://www.agrilinks.org/post/feed-future-learning-agenda-phase-2.
Feed the Future Enabling Environment for Food Security, “Intra-African Agriculture Trade Improvement Scorecards Summary,” Agrilinks, February 2020, https://www.agrilinks.org/post/intra-african-agriculture-trade-improvement-scorecards-summary.
Feed the Future Enabling Environment for Food Security, “The Political Economy, Rules, and Impersonal Exchange in Market Systems,” Marketlinks, June 2019, https://www.marketlinks.org/post/political-economy-rules-and-impersonal-exchange-market-systems.
Feed the Future Enabling Environment for Food Security, “Using Political Economy Analysis to Improve the Enabling Environment for Agricultural Market Systems,” Marketlinks, May 2019, https://www.marketlinks.org/post/using-political-economy-analysis-improve-enabling-environment-agricultural-market-systems.
Feed the Future Enabling Environment for Food Security, “Water Governance Scorecard,” Agrilinks, June 2019, https://www.agrilinks.org/sites/default/files/resources/eefs_water_scorecard.pdf.
The World Bank, “Doing Business,” The World Bank, 2020, https://www.doingbusiness.org/.
The World Bank, “Enabling the Business of Agriculture,” The World Bank, 2019, https://eba.worldbank.org/.