The Regulation of Entry

Abstract

Examines the government regulations associatedwith the entry of new businesses into the market. Specifically, the proceduresand associated cost and time required to adhere to these regulations areevaluated for 85 countries in 1999. Data were collected from a variety of written publications provided by theindividual governments, discussions with representatives of governmentagencies, and reports from local law firms on entry regulation. The"standard" firm was considered, with such characteristics as: performsgeneral or commercial activities, operates in the country's largest city, andisexempt from industry-specific regulation. The results indicate that the average number of days needed to complete theentry regulation across the entire sample is 47, which equates to 47 percent ofgross domestic product (GDP) per capita. When the cost is examined by quartilesof GDP per capita in 1999, the average cost-per-capita-GDP ration for"rich" countries is only 10 percentwhile it is 108 percent in thepoorest countries. Additionally, the analysis shows that countries with a greater amount ofregulation tend to experience higher corruption, but the more strenuousregulations do not lead to better quality public goods. The findings areevaluated with respect to both the public interest theory and the tollbooththeory. (SRD)

Keywords: Corruption in government, Product quality, Public interest theory, Public choice theory, Tollbooth theory, Per capita income, Barriers to entry, Regulations, Legal procedures, Startups, Startup costs, Government