Abstract:

We present new data on the regulation of entry of start-up firms in 85 countries. The data cover 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.

Notes:

Reprinted in T. Beck, ed., Entrepreneurship in Developing Countries, Edward Elgar Publishing Company, 2009.