The Role of Regulation on Entry

This paper studies the effects of
differences in local administrative burdens in Italy in the
years 2005–2007 preceding a major reform that sped up firm
registration procedures. Combining regulatory data from a
survey on Italian provinces before the reform (costs and
time to start a business) with industry-level entry rates of
limited liability firms, it explores the effects of
regulatory barriers on the average of the annual entry rates
across industries with different natural propensities to
enter the market. The estimates of the cross-sectional
analysis show that lengthier and, to some extent, more
costly procedures reduced entry in sectors with naturally
high entry. A one-day delay in registration procedures
reduces the entry rate in highly dynamic sectors by more
than 1 percent. These results hold when I include measures
of local financial development and of efficiency of
bankruptcy procedures are included.