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Regulation of Entry and the Distortion of Industrial Organization

Journal of Applied Economics. Vol 13, No. 1, pp. 91-111, May 2010

Posted: 12 Jun 2010  

Raymond J. Fisman

National Bureau of Economic Research (NBER); Boston University

Virginia Sarria-Allende

IAE Business School - Universidad Austral

Multiple version iconThere are 2 versions of this paper

Date Written: May 2010

Abstract

We study the distortions of industrial organization caused by entry regulation. We take advantage of heterogeneity across industries in their natural barriers and growth opportunities to examine whether industries are differentially affected in countries according to entry regulation. First, we consider the effect of entry regulation on the (static) industry structure. We find that regulation has a greater impact in industries with lower natural barriers to entry, both on the number of firms and on the average size of firms. We find that the effect of entry regulation on industry share is not related to differences in natural barriers. Regarding industry dynamics, we find that in countries with high entry regulation, industries respond to growth opportunities through the expansion of existing firms, while in countries with low entry regulation, growth opportunities lead to the creation of new firms; finally, the total sectoral response is invariant to the level of regulation.

Keywords: regulation, regulation of entry

JEL Classification: O14, K20, L11, L50

Suggested Citation

Fisman, Raymond J. and Sarria-Allende, Virginia, Regulation of Entry and the Distortion of Industrial Organization (May 2010). Journal of Applied Economics. Vol 13, No. 1, pp. 91-111, May 2010. Available at SSRN: https://ssrn.com/abstract=1623422

Raymond Fisman

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Virginia Sarria-Allende (Contact Author)

IAE Business School - Universidad Austral ( email )

Buenos Aires
Argentina

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