Do Entry Regulations Deter Entrepreneurship and Job Creation? Evidence from Recent Reforms in Portugal

Lee Branstetter, Francisco Lima, Lowell Taylor and Ana Venâncio (avenancio@iseg.ulisboa.pt)

No 16473, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Recent research has suggested that the reduction of entry regulation can promote firm entry and job creation, but little is known about the quality of firms and jobs created through these reforms. To shed light on this question, we employ data from Portugal, a country which implemented one of the most dramatic and thorough policies of entry deregulation in the industrialized world. The impact of these major changes can be traced with a matched employer-employee database that provides unusually rich information on the quality of founders and employees associated with the new firms. Our assessment indicates that the short term consequences of the reform were just as one would predict with a standard economic model of entrepreneurship: The reform resulted in increased firm formation and employment, but mostly among "marginal firms" that would have been most readily deterred by existing heavy entry regulations. These marginal firms were typically small, owned by relatively poorly-educated entrepreneurs, operating in the low-tech sector (agriculture, construction, and retail trade). These firms were also less likely to survive their first two years than comparable firms that entered prior to the reform. The social impact of entry deregulation may be limited by the quality of the firms it creates.

JEL-codes: D73 K22 L26 L53 (search for similar items in EconPapers)
Date: 2010-10
Note: ITI PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

Published as Branstetter, L., Lima, F., Taylor, L., and Venancio, A., "Do Entry Regulations Deter Entrepreneurship and Job Creation? Evidence from Recent Reforms in Portugal." Forthcoming in the Economic Journal.

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