DP2953 The Regulation of Entry

Author(s): Simeon Djankov , Rafael La Porta , Florencio López-de-Silanes , Andrei Shleifer

Publication Date: September 2001

Keyword(s): regulation , business entry

JEL(s): H10 , K20 , L50

Programme Areas: Public Policy , Transition Economics

Link to this Page: www.cepr.org/pubs/dps/DP2953.asp

We present new data on the regulation of entry of start-up firms in 85 countries. The data covers the number of procedures, official time, and official cost that a start-up must bear before it can operate legally. The official costs of entry are extremely high in most countries. Countries with heavier regulation of entry have higher corruption and larger unofficial economies, but not better quality of public or private goods. Countries with more democratic and limited governments have lighter regulation of entry. The evidence is inconsistent with public interest theories of regulation, but supports the public choice view that entry regulation benefits politicians and bureaucrats.