Differentiating and connecting indicators: the quality and performance of law in the World Bank's Doing Business Project

Scholars have long argued that transnational legal indicators (TLIs) suffer from significant validity problems. In response to such critiques, the World Bank (WB) reformed its Doing Business (DB) legal indicators in 2014. This paper evaluates two important results of this reform: the WB distinguished between the quality and performance (efficiency) of law indicators and also claimed that they are positively correlated. I argue that this distinction is based on two different utilitarian perspectives; therefore, these indicators try to quantify different aspects of laws. However, new empirical tests indicate that they are not correlated. The statistical tests on the DB Resolving Insolvency Indicators do not show any strong correlation, and the case of Turkey's WB-led insolvency-law reform suggests that the developing countries can even incur efficiency losses from legal-quality improvements. Thus, this study demonstrates that the 2014 DB reform reproduced the validity problems inside the new distinctions and connections between its indicators, potentially creating new misconceptions for policy-makers.