Entry costs vary dramatically across countries. To assess their impact we construct a model with endogenous entry and operation decisions by firms and calibrate it to match the U.S. distribution of firms by age and size. Higher entry costs lead to greater misallocation of productive factors and lower TFP and output. In the model, countries with entry costs in the lowest decile of the distribution have 2.32 times higher TFP (3.43 in the data) than countries in the highest decile. As in the data, higher entry costs are associated with higher mean and variance of the employment distribution across firms.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number
2009-005.