Entry Deregulation, Market Turnover, and Efficiency: China’s Business Registration Reform

80 Pages Posted: 29 Apr 2022 Last revised: 7 Oct 2022

See all articles by Panle Jia Barwick

Panle Jia Barwick

University of Wisconsin - Madison - Department of Economics

Luming Chen

University of Wisconsin - Madison - Department of Economics

Shanjun Li

Cornell University - School of Applied Economics and Management

Xiaobo Zhang

Guanghua School of Management

Date Written: October 6, 2022

Abstract

Although entry regulation is ubiquitous across countries, comprehensive evaluations on how such regulations affect firm dynamics and productivity are lacking. We examine a 2012-2014 pilot program in Guangdong (which later became a national policy) that was designed to reduce firm registration costs and encourage entrepreneurial activities. We leverage the pilot program’s staggered implementation to address the key identification challenge of policy endogeneity. Using administrative data on firms’ business registrations and annual reports from 2008-2016, as well as field surveys, our analysis shows that the reform increased firm entry by 25% and firm exit by 8.7% in the manufacturing sector. Altogether, these newly registered firms as a result of the entry deregulation increased Guangdong’s total employment and revenue in the manufacturing sector by 2.5% and 1.8%, respectively. In addition, the productivity of post-reform entrants was 1.0% higher than the productivity of pre-reform entrants, likely due to the combination of relaxed financial constraints and more intense competition.

Keywords: Entry deregulation, productivity, market turnover

JEL Classification: L10, L50, L60, O40

Suggested Citation

Barwick, Panle Jia and Chen, Luming and Li, Shanjun and Zhang, Xiaobo, Entry Deregulation, Market Turnover, and Efficiency: China’s Business Registration Reform (October 6, 2022). Available at SSRN: https://ssrn.com/abstract=4090077 or http://dx.doi.org/10.2139/ssrn.4090077

Panle Jia Barwick

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States

HOME PAGE: http://pbarwick.org/

Luming Chen (Contact Author)

University of Wisconsin - Madison - Department of Economics ( email )

1180 Observatory Drive
Madison, WI 53706
United States

Shanjun Li

Cornell University - School of Applied Economics and Management ( email )

405 Warren Hall
Ithaca, NY 14853
United States

Xiaobo Zhang

Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
339
Abstract Views
1,786
Rank
167,339
PlumX Metrics