The Regulation of Entry

50 Pages Posted: 4 Oct 2000

See all articles by Simeon Djankov

Simeon Djankov

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

Florencio Lopez de Silanes

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

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)

Multiple version iconThere are 4 versions of this paper

Date Written: August 2001

Abstract

New data show that countries that regulate the entry of new firms more heavily have greater corruption and larger unofficial economies, but not better quality goods. The evidence supports the view that regulating entry benefits politicians and bureaucrats.

Djankov and his coauthors present new data on the regulation of the entry of start-up firms in 85 countries. The data cover the number of procedures, official time, and official costs that a start-up firm must bear before it can operate legally. The official costs of entry are extremely high in most countries.

Countries that regulate entry more heavily have greater corruption and larger unofficial economies, but not better quality goods (public or private). Countries with more democratic and limited governments regulate entry more lightly. The evidence is inconsistent with public interest theories of regulation, but supports the public choice view that regulating entry benefits politicians and bureaucrats.

This paper - a product of the Financial Sector Strategy and Policy Department - is part of a larger effort in the department to educate policymakers on the costs of regulation. The study was funded by the Bank's Research Support Budget under the research project "The Regulation of Small Businesses."

Suggested Citation

Djankov, Simeon and Lopez de Silanes, Florencio and La Porta, Rafael and Shleifer, Andrei, The Regulation of Entry (August 2001). Harvard Institute of Economic Research Paper No. 1904, KSG Working Paper No. 01-015; World Bank Policy Research Working Paper No. 2661. Available at SSRN: https://ssrn.com/abstract=242738

Simeon Djankov

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

Florencio Lopez de Silanes (Contact Author)

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

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

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