Entry Regulation as a Barrier to Entrepreneurship

54 Pages Posted: 1 Apr 2004 Last revised: 26 May 2004

See all articles by Leora F. Klapper

Leora F. Klapper

World Bank; World Bank - Development Research Group (DECRG)

Luc Laeven

European Central Bank (ECB); Centre for Economic Policy Research (CEPR)

Raghuram G. Rajan

University of Chicago - Booth School of Business; International Monetary Fund (IMF); National Bureau of Economic Research (NBER)

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Date Written: March 2004

Abstract

Using a comprehensive database of European firms, we study the effect of market entry regulations on the creation of new limited-liability firms, the average size of entrants, and the growth of incumbent firms. We find that costly regulations hamper the creation of new firms, especially in industries that should naturally have high entry. These regulations also force new entrants to be larger and cause incumbent firms in naturally high-entry industries to grow more slowly. Our results hold even when we correct for the availability of financing, the degree of protection of intellectual property, and labor regulations.

Suggested Citation

Klapper, Leora F. and Laeven, Luc A. and Rajan, Raghuram G., Entry Regulation as a Barrier to Entrepreneurship (March 2004). NBER Working Paper No. w10380, Available at SSRN: https://ssrn.com/abstract=519169

Leora F. Klapper

World Bank ( email )

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HOME PAGE: http://econ.worldbank.org/staff/lklapper

World Bank - Development Research Group (DECRG)

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Washington, DC 20433
United States

Luc A. Laeven

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Raghuram G. Rajan (Contact Author)

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States
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773-702-0458 (Fax)

International Monetary Fund (IMF) ( email )

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National Bureau of Economic Research (NBER)

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