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Firm Creation and the Ease and Cost of Doing Business

RSN-PCC Working Paper No. 17-009

34 Pages Posted: 9 Jan 2018  

Tristan Canare

Asian Institute of Management - Policy Center

Jamil Paolo Francisco

Asian Institute of Management

Jose Fernando Morales

Asian Institute of Management

Date Written: December 1, 2017

Abstract

Existing literature has studied the effects of business environment on business creation, private sector growth, and economic development. Using data from Philippine cities and municipalities from 2011 to 2015, this paper tested for the relationship between business creation and the ease and cost of doing business. The results provide evidence that the overall ease and cost of doing business is indeed associated with business creation, but the relationship becomes more apparent with disaggregation. In particular, lower cost of doing business is found to be a much stronger predictor of business creation than ease of doing business. The specific indicators that drive this relationship are minimum wage, price of electricity, price of water, and price of land from the ‘cost’ dimension, and number of days it takes to process a new business permit from the ‘ease’ dimension. This has implications on policy-making, especially in designing programs that target firm creation. The relationship between business creation and the ease and cost of doing business also changes across city and municipal income levels. Among the poorest municipalities, ease and cost of doing business loses its importance as a determinant of business creation; governance indicators become more important.

Keywords: Ease of Doing Business, Cost of Doing Business, Firm Creation, Philippines, Local Competitiveness

JEL Classification: O11

Suggested Citation

Canare, Tristan and Francisco, Jamil Paolo and Morales, Jose Fernando, Firm Creation and the Ease and Cost of Doing Business (December 1, 2017). RSN-PCC Working Paper No. 17-009. Available at SSRN: https://ssrn.com/abstract=3096366

Tristan Canare (Contact Author)

Asian Institute of Management - Policy Center ( email )

Eugenio Lopez Foundation Bldg
Joseph McMicking Campus, 123 Paseo de Roxas
Makati City, Metro Manila
Philippines

Jamil Paolo Francisco

Asian Institute of Management ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

Jose Fernando Morales

Asian Institute of Management ( email )

123 Paseo de Roxas
Makati City, Metro Manila
Philippines

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