Business Environment and Firm Entry : Evidence from International Data
Using a comprehensive database of firms in Western and Eastern Europe, the authors study how the business environment in a country drives the creation of new firms. They focus on regulations governing entry, although they also examine the effects o...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, D.C.
2013
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2004/03/3961649/business-environment-firm-entry-evidence-international-data-business-environment-firm-entry-evidence-international-data http://hdl.handle.net/10986/14724 |
| Summary: | Using a comprehensive database of firms
in Western and Eastern Europe, the authors study how the
business environment in a country drives the creation of new
firms. They focus on regulations governing entry, although
they also examine the effects of a developed financial
sector, a well-trained labor force, strong enforcement of
intellectual property rights, and strict labor laws. The
authors find entry regulations hamper entry, especially in
industries that naturally should have high entry. They find
that naturally "high entry" industries grow less,
have lower profitability, and account for a lower share of
the economy in countries with onerous regulations on entry.
Also, value added per employee in naturally "high
entry" industries grows more slowly in countries with
onerous regulations on entry. This suggests entry
regulations are neither benign nor welfare improving. The
authors also find less entry into labor-intensive industries
in countries with labor regulations that restrict the
ability to fire workers. They do not imply that all
regulations inhibit entry. In particular, regulations that
enhance the enforcement of intellectual property rights or
those that lead to a better developed financial sector do
lead to greater entry in industries that do more research
and development or industries that need more external
finance. Finally, other aspects of the environment also
matter: for instance, the general availability of skilled
labor enhances entry in industries that require skilled labor. |
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