Entrepreneurship and enforcement institutions: Disaggregated evidence for Spain

Miguel Garcia-Posada and Juan Mora-Sanguinetti

No 1405, Working Papers from Banco de España

Abstract: Entry of new firms, both in the form of entrepreneurs and corporations, fosters competition and productivity. The entry of firms and productivity have both been low in the Spanish economy over recent years. This paper analyses the determinants of entry focusing on the role of the design and efficacy of enforcement institutions (the judicial system), an aspect traditionally overlooked. To do this, we exploit disaggregated data at the local level in Spain. We find that higher judicial efficacy increases the entry rate of firms, while it has no effect on the exit rate. Crucially, that impact only occurs in the case of the entry rates for entrepreneurs, defined as self-employed, but not in the case of limited liability corporations. This finding may be due to the fact that judicial (in)efficacy can be regarded as a fixed cost to be paid by the agents that litigate. Hence, the economic activity of entrepreneurs – and specifically, their entry into the market – is expected to be more affected than that of larger firms.

Keywords: entrepreneurship; judicial efficacy; barriers to entry (search for similar items in EconPapers)
JEL-codes: K40 L26 M13 R12 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2014-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /14/Fich/dt1405e.pdf First version, March 2014 (application/pdf)

Related works:
Journal Article: Entrepreneurship and enforcement institutions: disaggregated evidence for Spain (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1405

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