Advanced Search
MyIDEAS: Login

Evaluating the effects of entry regulations and firing costs on international income differences

Contents:

Author Info

  • Hernan Moscoso Boedo

    ()

  • Toshihiko Mukoyama

    ()

Abstract

This paper analyzes the effects of entry regulations and firing costs on cross-country differences in income and productivity. We construct a general equilibrium industry- dynamics model and quantitatively evaluate it using the cross-country data on entry costs and firing costs. Entry costs lower overall productivity in an economy by keeping low- productivity establishments in operation and making the establishment size inefficiently large. Firing costs lower productivity by reducing the reallocation of labor from low- productivity establishments to high-productivity establishments. The linear regression of the data on the model prediction accounts for 27% of the cross-sectional variation in total factor productivity. Moving the level of entry costs and firing costs from the U.S. level to that of the average of low income countries (countries with a Gross National Income below 2% of the U.S. level) reduces TFP by 27% in the model without capital, and by 34% in the model with capital and capital adjustment costs.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1007/s10887-011-9077-y
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 17 (2012)
Issue (Month): 2 (June)
Pages: 143-170

as in new window
Handle: RePEc:kap:jecgro:v:17:y:2012:i:2:p:143-170

Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=102931

Related research

Keywords: Entry cost; Firing cost; International income differences; Industry dynamics; D24; E23; J65; L11; O11;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Chang-Tai Hsieh & Peter Klenow, 2009. "Misallocation and Manufacturing TFP in China and India," Working Papers 09-04, Center for Economic Studies, U.S. Census Bureau.
  2. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-50, September.
  3. Laura Alfaro & Andrew Charlton & Fabio Kanczuk, 2008. "Plant-Size Distribution and Cross-Country Income Differences," NBER Working Papers 14060, National Bureau of Economic Research, Inc.
  4. Toshihiko Mukoyama & Yoonsoo Lee, 2008. "Entry, Exit, and Plant-level Dynamics over the Business Cycle," 2008 Meeting Papers 454, Society for Economic Dynamics.
  5. Raphael Bergoeing & Norman V. Loayza & Facundo Piguillem, 2011. "The Aggregate and Complementary Impact of Micro Distortions," Working Papers wp338, University of Chile, Department of Economics.
  6. Russell W. Cooper & John C. Haltiwanger, 2006. "On the Nature of Capital Adjustment Costs," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 611-633.
  7. Roberto M. Samaniego, 2008. "Entry, Exit and Business Cycles in a General Equilibrium Model," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(3), pages 529-541, July.
  8. James Tybout, 1999. "Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?," Development and Comp Systems 9906001, EconWPA, revised 10 Jun 1999.
  9. Richard Rogerson & Diego Restuccia, 2004. "Policy Distortions and Aggregate Productivity with Heterogeneous Plants," 2004 Meeting Papers 69, Society for Economic Dynamics.
  10. Winfried Koeniger & Julien Prat, 2007. "Employment Protection, Product Market Regulation and Firm Selection," Working Papers 07-03, Utrecht School of Economics.
  11. Monique Ebell & Christian Haefke, 2009. "Product Market Deregulation and the U.S. Employment Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 479-504, July.
  12. Gary Hansen, 2010. "Indivisible Labor and the Business Cycle," Levine's Working Paper Archive 233, David K. Levine.
  13. Markus Poschke, 2007. "Employment protection, firm selection, and growth," 2007 Meeting Papers 389, Society for Economic Dynamics.
  14. Riccardo DiCecio & Levon Barseghyan, 2010. "Entry Costs, Industry Structure, and Cross-Country Income and TFP Differences," 2010 Meeting Papers 964, Society for Economic Dynamics.
  15. Markus Poschke, 2006. "The regulation of entry and aggregate productivity," Economics Working Papers ECO2006/21, European University Institute.
  16. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
  17. Hernan J. Moscoso-Boedo & Pablo N. D’Erasmo, 2012. "Misallocation, Informality, and Human Capital," Virginia Economics Online Papers 401, University of Virginia, Department of Economics.
  18. Djankov, Simeon & La Porta, Rafael & Shleifer, Andrei & Lopez de Silanes, Florencio, 2001. "The regulation of entry," Policy Research Working Paper Series 2661, The World Bank.
  19. Roberto M. Samaniego, 2006. "Employment Protection and High-Tech Aversion," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(2), pages 224-241, April.
  20. D'Erasmo, Pablo N. & Moscoso Boedo, Hernan J., 2012. "Financial structure, informality and development," Journal of Monetary Economics, Elsevier, vol. 59(3), pages 286-302.
  21. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  22. Ramon Marimon & Vincenzo Quadrini, 2005. "Competition, innovation and growth with limited commitment," Economics Working Papers 933, Department of Economics and Business, Universitat Pompeu Fabra.
  23. Veracierto, Marcelo, 2001. "Employment Flows, Capital Mobility, and Policy Analysis," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(3), pages 571-95, August.
  24. Samaniego, Roberto M., 2006. "Do Firing Costs Affect The Incidence Of Firm Bankruptcy?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(04), pages 467-501, September.
  25. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  26. Gabriel Felbermayr & Julien Prat, 2011. "Product Market Regulation, Firm Selection, And Unemployment," Journal of the European Economic Association, European Economic Association, vol. 9(2), pages 278-317, 04.
  27. Peter Klenow & Andrés Rodríguez-Clare, 1997. "The Neoclassical Revival in Growth Economics: Has It Gone Too Far?," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 73-114 National Bureau of Economic Research, Inc.
  28. Levon Barseghyan, 2008. "Entry costs and cross-country differences in productivity and output," Journal of Economic Growth, Springer, vol. 13(2), pages 145-167, June.
  29. Messina, Julián, 2003. "The role of product market regulations in the process of structural change," Working Paper Series 0217, European Central Bank.
  30. Richard Rogerson, 2010. "Indivisible Labor, Lotteries and Equilibrium," Levine's Working Paper Archive 250, David K. Levine.
  31. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.
  32. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-38, October.
  33. Ricardo Lagos, 2006. "A model of TFP," Staff Report 345, Federal Reserve Bank of Minneapolis.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kap:jecgro:v:17:y:2012:i:2:p:143-170. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.