The Regulation of Entry

Posted: 1 Dec 2009  

Simeon Djankov

London School of Economics & Political Science (LSE); Peter G. Peterson Institute for International Economics

Rafael La Porta

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Florencio Lopez de Silanes

SKEMA Business School; National Bureau of Economic Research (NBER)

Multiple version iconThere are 4 versions of this paper

Date Written: 2001

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

Suggested Citation

Djankov, Simeon and La Porta, Rafael and Shleifer, Andrei and Lopez de Silanes, Florencio, The Regulation of Entry (2001). University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship. Available at SSRN: https://ssrn.com/abstract=1513809

Simeon Djankov (Contact Author)

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Rafael La Porta

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrei Shleifer

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-5046 (Phone)
617-496-1708 (Fax)

HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Florencio Lopez de Silanes

SKEMA Business School ( email )

Avenue Willy Brandt, Euralille
Lille, 59777
France

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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