Entry regulation as a barrier to entrepreneurship |
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| Authors: | Leora Klapper Luc Laeven Raghuram Rajan |
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| Affiliation: | 1. World Bank, 1818 H Street, NW, Washington, DC 20433, USA;2. Centre for Economic Policy Research, 90-98 Goswell Road, London EC1 V 7RR, UK;3. International Monetary Fund, 700 19th Street, NW, Washington, DC 20431, USA;4. University of Chicago Graduate School of Business, 5807 South Woodlawn Avenue, Chicago, IL 60637, USA;5. National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138, USA |
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| Abstract: | Using a comprehensive database of European firms, we study the effect of market entry regulations on the creation of new limited-liability firms, the average size of entrants, and the growth of incumbent firms. We find that costly regulations hamper the creation of new firms, especially in industries that should naturally have high entry. These regulations also force new entrants to be larger and cause incumbent firms in naturally high-entry industries to grow more slowly. Our results hold even when we correct for the availability of financing, the degree of protection of intellectual property, and labor regulations. |
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| Keywords: | G18 G38 L51 M13 |
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