[Excerpt] How private firms contribute to economic mobility and poverty reduction and what governments can do to enhance their contribution is the theme of this book. We look first at the positive role the private sector plays in economic development, a role that has received less emphasis that that of other players. We then focus on the labor market and how various mechanisms in the economy interact to affect conditions for people as workers and as consumers. The volume examines the links among the business environment, private sector development, economic growth, poverty reduction, and economic mobility.
Until recently, development economists tended to assume a role for private enterprises in reducing poverty, without articulating it explicitly. Then the new institutional economics literature, with its emphasis on transaction costs, began to focus on the environment in which private businesses operate in various countries—the "investment climate." Given subsequent surveys and research reports, including some published in this volume, we are now in a much better position than even five years ago to identify areas of the investment climate in which improvements should yield substantial growth benefits.