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Entry Barriers, Idiosyncratic Distortions, and the Firm Size Distribution

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  • Roberto N. Fattal-Jaef

Abstract

This paper studies the interaction between barriers to firm entry and distortions to allocative efficiency in a standard model of firm dynamics. We derive a strategy to infer entry barriers based on cross-country differences in the firm size distribution and idiosyncratic distortions. The inferred barriers resemble regulation-based indicators in advanced economies but are substantially higher in middle- and low-income countries. Regulation-based indicators cannot account for cross-country differences in average firm size and underestimate the aggregate productivity gains associated with their removal by up to 8 percent on average.

Suggested Citation

  • Roberto N. Fattal-Jaef, 2022. "Entry Barriers, Idiosyncratic Distortions, and the Firm Size Distribution," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(2), pages 416-468, April.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:2:p:416-68
    DOI: 10.1257/mac.20200234
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    Cited by:

    1. Ranasinghe, Ashantha, 2023. "Gender Specific Distortions, Entrepreneurship and Misallocation," Working Papers 2023-1, University of Alberta, Department of Economics, revised 27 Jul 2023.
    2. Lee, Munseob & Shin, Yongseok, 2023. "The Plant-Level View of Korea's Growth Miracle and Slowdown," IZA Discussion Papers 16553, Institute of Labor Economics (IZA).
    3. Amaral, Afonso & Morgan, M. Granger & Mendonça, Joana & Fuchs, Erica R.H., 2023. "National core competencies and dynamic capabilities in times of crisis: Adaptive regulation of new entrants in advanced technology markets," Research Policy, Elsevier, vol. 52(4).

    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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