EconPapers    
Economics at your fingertips  
 

Barriers to Entry and Development

Berthold Herrendorf () and Arilton Teixeira ()

Working Papers from Department of Economics, W. P. Carey School of Business, Arizona State University

Abstract: One of the most challenging questions in economics is why some countries are so much richer than others. In this paper, we assess the role of cross-country differences in barriers to entry. This is motivated by the recent evidence about both their prevalence in the third world and their harmful economic consequences. We construct a growth model with capital in which barriers to entry give monopoly power to insider groups and allow them to extract rents. Our first contribution is to solve the dynamic rent-seeking problem of the insider groups and show that larger barriers reduce TFP, the capital-output ratio, and per-capita GDP and increase the relative price of capital. In other words, our model is consistent with the evidence that poorer countries have lower TFPs and capital-output ratios and higher relative prices of capital. Our second contribution is to take our model to the data and assess quantitatively the aggregate implications of barriers to entry. Our most important finding is that barriers to entry have non-linear effects: while small to medium-sized barriers are harmful, large barriers can have disastrous quantitative effects.

References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
http://wpcarey.asu.edu/tools/mytools/pubs_admin/FI ... ryandDevelopment.pdf
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/BarrierstoEntryandDevelopment.pdf [301 Moved Permanently]--> https://wpcarey.asu.edu/tools/mytools/pubs_admin/FILES/BarrierstoEntryandDevelopment.pdf)

Related works:
Journal Article: BARRIERS TO ENTRY AND DEVELOPMENT (2011)
Working Paper: Barriers to Entry and Development (2009) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:asu:wpaper:2167726

Access Statistics for this paper

More papers in Working Papers from Department of Economics, W. P. Carey School of Business, Arizona State University Contact information at EDIRC.
Bibliographic data for series maintained by Steve Salik ().

 
Page updated 2021-01-15
Handle: RePEc:asu:wpaper:2167726