Deregulation of Business

50 Pages Posted: 9 Jun 2008

See all articles by Evgeny Yakovlev

Evgeny Yakovlev

New Economic School

Ekaterina Zhuravskaya

Paris School of Economics (PSE)

Date Written: December 2007

Abstract

What determines the enforcement of deregulation reform of business activities? What are the outcomes of deregulation? We address these questions using an episode of a drastic reform in Russia between 2001 and 2004 which liberalized registration, licensing, and inspections. Based on the analysis of micro-level panel data on regulatory burden, we find that: 1) On average, the reform reduced the administrative costs of firms; but, the progress of reform had a substantial geographical variation. 2) The enforcement of deregulation reform was better in regions with a transparent government, low corruption, better access of the public to independent media sources, a powerful industrial lobby, and stronger fiscal autonomy. 3) Using the exogenous variation in regulation generated by the interaction of reform and its institutional determinants, we find a substantial positive effect of deregulation on net entry and small business employment and no effect on pollution and public health. The results support public choice theory of the nature of regulation and are inconsistent with the predictions of public interest theory.

Keywords: Deregulation, Enforcement, Entry, Public choice, Reform, Regulation, Transparency

JEL Classification: H10, K2, K20, L50

Suggested Citation

Yakovlev, Evgeny and Zhuravskaya, Ekaterina, Deregulation of Business (December 2007). CEPR Discussion Paper No. DP6610. Available at SSRN: https://ssrn.com/abstract=1140539

Evgeny Yakovlev

New Economic School ( email )

Skolkovskoe shosse 45
Moscow, 121343
Russia

Ekaterina Zhuravskaya (Contact Author)

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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