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Long- and Short-run Relationship Between Firm Creation and the Ease and Cost of Doing Business

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  • Tristan Canare
  • Jamil Paolo Francisco
  • Jose Fernando Morales

Abstract

To promote private-sector growth, many countries have implemented reforms aimed at making it easier and less costly to do business. Using data from Philippine cities and municipalities from 2011 to 2015, this paper tested for the relationship between business creation and the ease and cost of doing business. The results provide evidence that the overall ease and cost of doing business is indeed associated with business creation, but the relationship becomes more apparent with disaggregation. In particular, lower cost of doing business is found to be a much stronger predictor of business creation than ease of doing business. The specific indicators that drive this relationship are minimum wage, price of electricity, price of water, and price of land from the “cost” dimension, and number of days to process a new business permit from the “ease” dimension. These relationships have implications on policy making, especially in designing programs that target firm creation.

Suggested Citation

  • Tristan Canare & Jamil Paolo Francisco & Jose Fernando Morales, 2019. "Long- and Short-run Relationship Between Firm Creation and the Ease and Cost of Doing Business," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 26(2), pages 249-275, May.
    • Handle: RePEc:taf:ijecbs:v:26:y:2019:i:2:p:249-275
    DOI: 10.1080/13571516.2018.1558636
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