An Analysis of the Business Environment in Kosovo Using Growth Diagnostics Approach

  • Fadil Sahiti


The empirical literature highlights various business environment factors that affect rates of private investment and entrepreneurship as drivers of economic growth. Most of these factors belong to one of the following dimensions: human and physical infrastructure; legal and regulatory institutions (understood as the rules of the game in which firms engage, and the organizations that implement these rules and services); and the quality of the financial system (e.g., cost of and access to finance). Using information from various international and national sources, this chapter examines not only the set of constraints on firm growth but also which among these constraints is the most binding.


  1. Brock, W., Durlauf, S., & West, K. (2003). Policy evaluation in uncertain economic environments (NBER Working Papers, No. W10025).Google Scholar
  2. Carlin, W., & Seabright, P. (2007). Bring me sunshine: Which parts of the business climate should public policy try to fix? (Unpublished manuscript). Available at
  3. Carlin, W., Schaffer, M., & Seabright, P. (2006). Where are the real bottlenecks? A Lagrangian approach to identifying constraints on growth from subjective survey data (CEPR Discussion Paper 5719).Google Scholar
  4. Djankov S., La Porta R., Lopez-de-Silanes F., & Shleifer A. (2006). The law and economics of self-dealing (Working Paper). World Bank.Google Scholar
  5. Dollar, D., Hallward-Driemeier, M., & Mengistae, T. (2005). Investment climate and firm performance in developing economies. Economic Development and Cultural Change, 54, 1–31.CrossRefGoogle Scholar
  6. European Commission. (2018). Kosovo2018 Report. Commission staff working document. Strasburg.
  7. Felipe, J., & Usui, N. (2008, February). Rethinking the growth diagnostics approach: Questions from the practitioners. Asian Development Bank. Version of February.Google Scholar
  8. Fernández-Arias, E. (2008). Living with debt: How to limit the risks of Sovereign finance. Inter-American Development Bank.Google Scholar
  9. Hausmann, R. (2005). Tanzania comments. In Growth path workshop (pp. 1–2). Washington, DC: The World Bank.Google Scholar
  10. Hausmann, R., & Rodrik, D. (2005). Self-discovery in a development strategy for El Salvador. Brainstorming on Growth Analysis Methodology (GAM). Washington, DC: Inter-American Development Bank.Google Scholar
  11. Hausmann, R., & Klinger, B. (2007). Growth diagnostic: Belize. Cambridge: Centre for International Development.Google Scholar
  12. Hausmann, R., Rodrik, D., & Velasco, A. (2005). Growth diagnostics. Cambridge, MA: Harvard University, mimeo.Google Scholar
  13. Hausmann, R., Klinger, B., & Wagner, R. (2008). Doing growth diagnostics in practice: A mindbook (Harvard University Centre for International Development Working Paper 177).Google Scholar
  14. Hoti, A. (2011). Returns for education in Kosovo: Estimates of wage and employment premia. South East European Journal of Economics and Business, 6(1), 71–84.CrossRefGoogle Scholar
  15. IMF. (2018). Republic of Kosovo; Selected Issues (IMF Country Report No. 18/31).Google Scholar
  16. Kaufmann, D., Aart, K., & Mastruzzi, M. (2007). Governance matters VI: aggregate and individual governance indicators for 1996–2006 (World Bank Policy Research Working Paper No. 4280). Washington, DC.Google Scholar
  17. Lazonick, W. (2012). The innovative enterprise and the developmental state: Toward an economics of organizational success. Paper prepared for the annual conference of the Institute for New Economic Thinking, Breton Woods, NH, April 8–11, 2011, and revised for the conference on Finance, Business Models, and Sustainable Prosperity, Ford Foundation, New York.Google Scholar
  18. Lazonick, W. (2013). The theory of innovative enterprise: Methodology, ideology, and institutions. In Jamee K. Moudud, Cyrus Bina, & Patrick L. Mason (Eds.), Alternative theories of competition: Challenges to the orthodoxy (pp. 127–159). London and New York: Routledge.Google Scholar
  19. Leipziger, D., & Zagha, R. (2006). Getting out of the rut. Finance and Development (IMF), 43(1), 16.Google Scholar
  20. Lin, J. (2012). New structural economics: A framework for rethinking development and policy. Washington: World Bank.
  21. Mincer, J. (1958). Investment in human capital and personal income distribution. The Journal of Political Economy, 66(4), 281–302.CrossRefGoogle Scholar
  22. Manski, C. (2000). Identification problems and decisions under ambiguity: Empirical analysis of treatment response and normative analysis of treatment choice. Journal of Econometrics, 95(2), 415–442.CrossRefGoogle Scholar
  23. OECD. (2009). Strategies for aligning stimulus measures with long-term growth. Paris: OECD.Google Scholar
  24. OECD. (2012). SME policy index: Western Balkans and Turkey 2012: Progress in the implementation of the small business act for Europe. Paris: OECD Publishing.
  25. OECD. (2013, March). Assessment of the Kosovo innovation system (RCI Project Paper). OECE Development.Google Scholar
  26. OECD. (2016). Overview: 2016 small business act assessment of the Western Balkans and Turkey. In SME policy index: Western Balkans and Turkey 2016: Assessing the Implementation of the Small Business Act for Europe. Paris: OECD Publishing.
  27. Riinvest. (2017). Business environment in Kosovo: From SMEs perspective. Prishtina.Google Scholar
  28. Rodriguez, F. (2005). Comment on Hausmann and Rodrik. Journal of the Latin American and Caribbean Economic Association, 6(1), 101–110.Google Scholar
  29. Rodrik, D. (2006). Why we learn nothing from regressing economic growth on policies. Cambridge, MA: Harvard University, mimeo.Google Scholar
  30. Rodrik, D. (2010). Diagnostics before prescription. Journal of Economic Perspectives, 24(3), 33–44.CrossRefGoogle Scholar
  31. Rodrik, D., Subramanian, A., & Trebbi, F. (2004). Institutions rule: The primacy of institutions over geography and integration in economic development. Journal of Economic Growth, 9(2), 131–165.CrossRefGoogle Scholar
  32. Sartor, O. (2007). An outline and critique of growth diagnostics as a response to the policy vacuum left by the Washington consensus. Seminar Paper in Development Economics, Institute of Public Economics, Humboldt University, Berlin.Google Scholar
  33. Sen, K., & Kirkpatrick, C. (2009). A diagnostic approach to economic growth and employment policy in low income economies: The case of Kosovo. Journal of International Development, 23(1), 132–154.CrossRefGoogle Scholar
  34. Sen, K., & Kirkpatrick, C. (2011). A diagnostics approach to economic growth and employment policy in low income economies: The case of Kosovo. Journal of International Development, 23(1): 132–154.Google Scholar
  35. Stiglitz, J., & Weiss, A. (1981). Credit rationing in markets with imperfect information. American Economic Review, 71(3), 393–409.Google Scholar
  36. Sutherland, D., Sonia, A., Balázs, É., & Tomasz, K. (2009). Infrastructure investment: Links to growth and the role of public policies (Economics Department Working Paper No. 686 ECO/WKP [2009]27).Google Scholar
  37. World Bank. (2012a). World Bank—Kosovo partnership: Country program snapshot. Pristina: The World Bank Country Office in Kosovo.Google Scholar
  38. World Bank. (2012b). Implementation status and results: Kosovo institutional development for education project. Washington, DC: The World Bank.Google Scholar
  39. World Bank. (2016). Worldwide governance indicators.

Copyright information

© The Author(s) 2019

Authors and Affiliations

  • Fadil Sahiti
    • 1
  1. 1.Rochester Institute of Technology KosovoPrishtinëKosovo

Personalised recommendations