Abstract

http://ssrn.com/abstract=557830
 
 

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Business Environment and Firm Entry: Evidence from International Data


Leora F. Klapper


World Bank; World Bank - Development Research Group (DECRG)

Luc Laeven


International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Raghuram G. Rajan


University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

June 2004

World Bank Working Paper No. 3232

Abstract:     
Using a comprehensive database of firms in Western and Eastern Europe, we study how the business environment in a country drives the creation of new firms. Our focus is on regulations governing entry. We find entry regulations hamper entry, especially in industries that naturally should have high entry. Also, value added per employee in naturally "high entry" industries grows more slowly in countries with onerous regulations on entry. The consequences of more restrictive entry barriers are seen, not in young firms, but in older firms, who grow more slowly and to a smaller size. Thus the absence of the disciplining effect of entry has real adverse effects. Interestingly, regulatory entry barriers have no adverse effect on entry in corrupt countries, only in less corrupt ones. Taken together, the evidence suggests bureaucratic entry regulations are neither benign nor welfare improving. However, not all regulations inhibit entry. In particular, regulations that enhance the enforcement of intellectual property rights or those that lead to a better developed financial sector do lead to greater entry in industries that do more R&D or industries that need more external finance.

Number of Pages in PDF File: 64

Keywords: Entry, Regulations

JEL Classification: K20, L50

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Date posted: June 23, 2004  

Suggested Citation

Klapper, Leora F. and Laeven, Luc and Rajan, Raghuram G., Business Environment and Firm Entry: Evidence from International Data (June 2004). World Bank Working Paper No. 3232. Available at SSRN: http://ssrn.com/abstract=557830 or http://dx.doi.org/10.2139/ssrn.557830

Contact Information

Leora F. Klapper (Contact Author)
World Bank ( email )
1818 H Street, N.W.
Washington, DC 20433
United States
202-473-8738 (Phone)
HOME PAGE: http://econ.worldbank.org/staff/lklapper
World Bank - Development Research Group (DECRG)
1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
Luc A. Laeven
International Monetary Fund (IMF) ( email )
700 19th Street, N.W.
Washington, DC 20431
United States
202-6239020 (Phone)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Raghuram G. Rajan
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4437 (Phone)
773-702-0458 (Fax)
International Monetary Fund (IMF) ( email )
700 19th Street NW
Washington, DC 20431
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
773-702-9299 (Phone)
773-702-0458 (Fax)
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