How Do Regulations of Entry and Credit Access Relate to Industry Competition? International Evidence

46 Pages Posted: 22 May 2018

See all articles by Deniz Igan

Deniz Igan

International Monetary Fund (IMF) - Financial Studies Division

Ali Mirzaei

American University of Sharjah

Tomoe Moore

Brunel University London

Date Written: April 2018

Abstract

We examine the extent to which regulations of entry and credit access are related to competition using data on 28 manufacturing sectors across 64 countries. A robust finding is that bureaucratic and costly entry regulations tend to hamper competition, as proxied by the price-cost margin, in the industries with a naturally high entry rate. Rigid entry regulations are also associated with a larger average firm size. Conversely, credit information registries are associated with lower price-cost margin and smaller average firm size in industries that rely heavily on external finance-consistent with access to finance exerting a positive effect on competition. These results suggest that incumbent firms are likely to enjoy the rent and market share arising from strict entry regulations, whereas regulations enhancing access to credit limit such benefits.

Keywords: Entry regulations, Credit access, Price-cost margins, Industry competition

JEL Classification: G18, G38, L11, L51, L60

Suggested Citation

Igan, Deniz and Mirzaei, Ali and Moore, Tomoe, How Do Regulations of Entry and Credit Access Relate to Industry Competition? International Evidence (April 2018). IMF Working Paper No. 18/84. Available at SSRN: https://ssrn.com/abstract=3182509

Deniz Igan (Contact Author)

International Monetary Fund (IMF) - Financial Studies Division ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ali Mirzaei

American University of Sharjah ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

Tomoe Moore

Brunel University London ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
10
Abstract Views
134
PlumX Metrics