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In this paper, I address these questions, exploiting a natural experiment in firm entry regulation. After German reunification, East and West Germany faced different economic conditions, but fell under the same law that imposes a substantial mandatory standard on entrepreneurs who want to start a legally independent firm in one of the regulated occupations. The empirical results suggest that the entry regulation suppresses long-living entrants, not only entrants in general or transient, short-lived entrants. This effect on the number of long-living entrants is not accompanied by a counteracting effect on the performance of long-living entrants, as measured by firm size several years after entry.
The inclusion of business entry indicators in the World Bank's Doing Business project has led to an acceleration in reform: in , reforms took place in countries. A large academic literature has followed: academic articles have used the data compiled by Djankov and others and subsequently by the World Bank.
The author identifies three theories as to why some countries impose burdensome entry requirements. He also surveys the literature on the effects of making business entry easier. I formulate and estimate a model of entrepreneurial choice to address the heterogeneity in occupations and earnings observed within the informal sector.
I test the implications of the model with reduced form and nonparametric techniques, and use a structural econometric approach to empirically identify occupational patterns and earnings using data from the Cameroon informal sector. The empirical validity of the structural estimates is tested and the estimated model is used in counterfactual policy simulations to show how microfinance and business training programs can strengthen the efficiency of the informal sector and substantially improve its earning potential. Using data from the World Bank survey of Indian microenterprises and applying the semi-parametric propensity score matching technique, we find that being registered leads to significant gains in sales per employee and value added per employee.
Large gains are also noted for male-owned firms, those operating with or without paid labor and those operating outside of the owner's home. Coming out of the shadows?
Estimating the impact of bureaucracy simplification and tax cut on formality in Brazilian microenterprises Author s : Monteiro, Joana C. We document an increase of 13 percentage points in formal licensing among retail firms created after the program when compared to firms in ineligible sectors. The impact on retailers is robust to a series of tests. We find no impact on construction, transportation, services and manufacturing sectors. Do entry regulations deter entrepreneurship and job creation?
Our analysis uses matched employer? We find that the short-term consequences of the reform were as one would predict with a standard economic model of entrepreneurship: the reform resulted in increased firm formation and employment, but mostly among? These marginal firms were typically small, owned by relatively poorly educated entrepreneurs, and operating in low-technology sectors agriculture, construction and retail trade.
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In comparison to firms that entered in the absence of the reform, these marginal firms were less likely to survive their first two years. It capitalizes on a unique panel dataset, result of a five-year project.
More importantly, we show that this improvement is not valid for the smallest units, and that it is made possible for the others by changing their operating conditions. Released from the constraints of informality, they can access better equipment, increase their scale of operation, and operate in a more competitive environment. Economic regulations, red tape, and bureaucratic corruption in post-communist economies Author s : Dinissa Duvanova Journal : World Development, Volume 59, July , Pages Abstract : Should state regulatory involvement in the economy necessarily generate corruption?
While excessive regulatory burden is often treated as a cause of corruption, this paper argues otherwise. The analysis of business survey data covering 25 post-communist economies demonstrates that mechanisms of regulatory implementation, rather than heavy-handed regulatory policy, are responsible for bribery. This analysis draws attention to the theoretical distinction between different types of regulatory hurdles and their differential effects on the quality of governance.
Entrepreneurial innovation: the importance of context Author s : Erkko Autio, Martin Kenney, Philippe Mustar, Don Siegel, Mike Wright Journal : Research Policy, Volume 43, Issue 7, September , Pages Abstract : The purpose of this article and the special issue is to improve our understanding of the theoretical, managerial, and policy implications of entrepreneurial innovation. We accomplish this objective by examining the role of context in stimulating such activity, as well as its impact on the outcomes of entrepreneurial innovation.
Our analysis begins by outlining an overarching framework for entrepreneurial innovation and context. With reference to this framework we then compare the attributes of national innovation systems, entrepreneurship and entrepreneurial innovation, and categorize contextual influences on entrepreneurial innovation. We then situate the papers presented in this special issue within this framework. We conclude by outlining an agenda for additional research on this topic, focusing on the relationships between contexts and entrepreneurial innovation and then discuss policy implications, focusing on how public and private actors can meet these challenges.
Entry barriers in retail trade Author s : Schivardi, Fabiano; Viviano, Eliana Journal : The Economic Journal, Volume , Issue , pages , March Abstract : The reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and lower productivity of incumbent firms.
Liberalising entry has a positive effect on investment in ICT, increases employment and compresses labour costs in large shops.
In areas with more stringent entry regulation, lower productivity coupled with larger margins results in higher consumer prices. Evaluating the effects of entry regulations and firing costs on international income differences Author s : Boedo, Hernan J. Moscoso; Mukoyama, Toshihiko Journal : Journal of Economic Growth, Volume 17, Issue 2, , June Abstract : This paper analyzes the effects of entry regulations and firing costs on cross-country differences in income and productivity.
We construct a general equilibrium industry-dynamics model and quantitatively evaluate it using the cross-country data on entry costs and firing costs. Entry costs lower overall productivity in an economy by keeping low-productivity establishments in operation and making the establishment size inefficiently large.
Firing costs lower productivity by reducing the reallocation of labor from low-productivity establishments to high-productivity establishments. Moving the level of entry costs and firing costs from the U. We focus both on individual characteristics and on countries? We show that individual characteristics, such as gender, age, and status in the workforce are important determinants of entrepreneurship, and we also highlight the relevance of social networks, self-assessed skills, and attitudes toward risk. Moreover, we find that regulation plays a critical role, particularly for those individuals who become entrepreneurs to pursue a business opportunity.
The individual characteristics that are impacted most by regulation are those measuring working status, social network, business skills, and attitudes toward risk. The availability of three types of financing sources was analysed: traditional debt financing, venture capital financing, and informal investments. Regulatory business costs were found to deter opportunity driven entrepreneurship, but had no impact on necessity entrepreneurship.
The present paper argues that this slow pace of structural change, measured by export sophistication and diversification, may well be the consequence of the authoritarian—redistributive social contracts that were established after the Independence and were subsequently only marginally reformed.
MENA social contracts are generally described as political bargains by which socioeconomic security, based on high levels of redistribution and state control of the economy, were traded against the absence of political freedom. We show in this paper that although redistribution and political authoritarianism have an impact on structural change, by their own, their combination certainly explains the deficit of structural transformation of MENA economies.
More specifically, we provide cross-sectional and dynamic-panel evidence that the positive impact of redistribution on structural change, measured by export diversification and sophistication, vanishes for the very high levels of authoritarianism characterizing the MENA region. Our results hold for different specifications of the estimated equations and of the social contract variable, as well as when endogeneity issues are addressed.
The paper finally describes the political economy that sustained, over the last three decades, this combination of political authoritarianism and slow productive diversification and sophistication throughout the region, before explaining how these features could well have inhibited the political capacities and willingness of most MENA incumbent regimes to reform the social contract in a radical and timely manner.
Journal : Journal of International Economics, Volume 89, Issue 2, Pages , March Abstract : Firm size follows Zipf's Law, a very fat-tailed distribution that implies a few large firms account for a disproportionate share of overall economic activity. This distribution of firm size is crucial for evaluating the welfare impact of economic policies such as barriers to entry or trade liberalization.
Using a multi-country model of production and trade calibrated to the observed distribution of firm size, we show that the welfare impact of high entry costs is small. In the sample of the 50 largest economies in the world, a reduction in entry costs all the way to the U. In addition, when the firm size distribution follows Zipf's Law, the welfare impact of the extensive margin of trade - newly imported goods at or near the exporting cutoff - is negligible.
The extensive margin of imports accounts for only about 5. This is because under Zipfs Law, the large, infra-marginal firms have a far greater welfare impact than the much smaller firms that comprise the extensive margin in these policy experiments.
The distribution of firm size matters for these results: in a counterfactual model economy that does not exhibit Zipfs Law the gains from a reduction in fixed entry barriers are an order of magnitude larger, while the gains from a reduction in variable trade costs are an order of magnitude smaller. Foreign bank presence and business regulations Author s : Kouretas, Georgios P.
We employ a panel dataset of 87 developing economies for the — period and measure the efficiency of business regulations using the indices from the Heritage and the Fraser datasets. Our results show that foreign bank presence exerts a positive impact on the efficiency of business regulations; however, we find no evidence in favor of a more pronounced positive effect when foreign banks originate from countries that have a more efficient business regulatory environment.
We focus on the interaction between the level of regulation and financial development and some individual characteristics that are important determinants of entrepreneurship, such as gender, business skills, and social networks. We find that entry regulation moderates the effect of business skills, while accentuating the effect of gender, even after accounting for the level of financial development. Specifically, women are more likely to enter into entrepreneurship in countries with higher levels of entry regulation, but mainly because they cannot find better work.
This effect is also more pronounced in countries that are less financially developed. Furthermore, individuals who report having business skills are less likely to enter entrepreneurship in countries with higher entry regulation. Finally, we also find that individuals who know other entrepreneurs are less likely to start large businesses in countries with higher levels of entry and contract enforcement regulation. Identifying the aggregate productivity effects of entry and size restrictions: an empirical analysis of license reform in India Author s : A.