Advanced Search
MyIDEAS: Login to save this paper or follow this series

Greasing the wheels of entrepreneurship? The impact of regulations and corruption on firm entry

Contents:

Author Info

Abstract

The paper investigates whether the impact of regulations on entrepreneurship depends on corruption. We first test whether regulations robustly deter firm entry into the markets. Our results show that some regulations are indeed important determinants of entrepreneurial activity. Specifically, more procedures required to start a business and larger minimum capital requirements are detrimental to entrepreneurship. Second, we test whether corruption reduces the negative impact of regulations on entrepreneurship in highly regulated economies. Our empirical analysis for a maximum of 43 countries over the period 2003-2005 shows that corruption is beneficial in highly regulated economies. At the maximum level of regulation among our sample of countries, corruption significantly increases entrepreneurial activity. Our results thus provide support for the ‘grease the wheels’ hypothesis.

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://www.kof.ethz.ch/publications/science/pdf/wp_166.pdf
Download Restriction: no

Bibliographic Info

Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 07-166.

as in new window
Length: 34 pages
Date of creation: May 2007
Date of revision:
Handle: RePEc:kof:wpskof:07-166

Contact details of provider:
Postal: Leonhardstrasse 21, CH-8092 Zürich
Phone: +41 44 632 42 39
Fax: +41 44 632 12 18
Email:
Web page: http://www.kof.ethz.ch
More information through EDIRC

Related research

Keywords: corruption; start-ups; grease the wheels; entrepreneurship; regulation; doing business;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Kaufmann, Daniel & Wei, Shang-Jin, 1999. "Does 'Grease Money' Speed Up the Wheels of Commerce?," MPRA Paper 8209, University Library of Munich, Germany.
  2. Wennekers, Sander & Thurik, Roy, 1999. " Linking Entrepreneurship and Economic Growth," Small Business Economics, Springer, vol. 13(1), pages 27-55, August.
  3. Glaeser, Edward L. & Saks, Raven E., 2006. "Corruption in America," Journal of Public Economics, Elsevier, vol. 90(6-7), pages 1053-1072, August.
  4. Oleh Havrylyshyn, 2001. "Recovery and Growth in Transition: A Decade of Evidence," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 4.
  5. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  6. Beck, Paul J. & Maher, Michael W., 1986. "A comparison of bribery and bidding in thin markets," Economics Letters, Elsevier, vol. 20(1), pages 1-5.
  7. Pierre-Guillaume Méon & Laurent Weill, 2010. "Is corruption an efficient grease?," ULB Institutional Repository 2013/92603, ULB -- Universite Libre de Bruxelles.
  8. 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.
  9. Vito Tanzi, 1998. "Corruption Around the World," IMF Working Papers 98/63, International Monetary Fund.
  10. Mauro, Paolo, 1998. "Corruption and the composition of government expenditure," Journal of Public Economics, Elsevier, vol. 69(2), pages 263-279, June.
  11. Antonio Ciccone & Elias Papaioannou, 2006. "Red tape and delayed entry," Economics Working Papers 985, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Friedrich Schneider, 2004. "Shadow Economies around the World: What do we really know?," IAW Discussion Papers 16, Institut für Angewandte Wirtschaftsforschung (IAW).
  13. Pierre-Guillaume Méon & Khalid Sekkat, 2005. "Does corruption grease or sand the wheels of growth?," Public Choice, Springer, vol. 122(1), pages 69-97, January.
  14. Xavier Sala-i-Martin, 1997. "I just ran four million regressions," Economics Working Papers 201, Department of Economics and Business, Universitat Pompeu Fabra.
  15. Gernot Doppelhofer & Ronald I. Miller & Xavier Sala-i-Martin, 2000. "Determinants of Long-Term Growth: A Bayesian Averaging of Classical Estimates (BACE) Approach," NBER Working Papers 7750, National Bureau of Economic Research, Inc.
  16. Klapper, Leora & Laeven, Luc & Rajan, Raghuram G, 2004. "Business Environment and Firm Entry: Evidence from International Data," CEPR Discussion Papers 4366, C.E.P.R. Discussion Papers.
  17. Uhlaner, L.M. & Thurik, A.R., 2006. "Postmaterialism Influencing Total Entrepreneurial Activity across Nations," ERIM Report Series Research in Management ERS-2006-062-ORG, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
  18. Isabel Grilo & Jesus-Maria Irigoyen, 2006. "Entrepreneurship in the EU: To Wish and not to be," Small Business Economics, Springer, vol. 26(4), pages 305-318, 05.
  19. Temple, Jonathan, 2000. "Growth Regressions and What the Textbooks Don't Tell You," Bulletin of Economic Research, Wiley Blackwell, vol. 52(3), pages 181-205, July.
  20. Pierre-Guillaume Méon & Anne-France Delannay, 2006. "The impact of European integration on the nineties' wave of mergers and acquisitions," DULBEA Working Papers 06-12.RS, ULB -- Universite Libre de Bruxelles.
  21. Axel Dreher & Thomas Herzfeld, 2005. "The Economic Costs of Corruption: A Survey and New Evidence," Public Economics 0506001, EconWPA.
  22. Edgardo Campos, J. & Lien, Donald & Pradhan, Sanjay, 1999. "The Impact of Corruption on Investment: Predictability Matters," World Development, Elsevier, vol. 27(6), pages 1059-1067, June.
  23. Raymond Fisman & Virginia Sarria-Allende, 2004. "Regulation of Entry and the Distortion of Industrial Organization," NBER Working Papers 10929, National Bureau of Economic Research, Inc.
  24. Leamer, Edward E, 1983. "Let's Take the Con Out of Econometrics," American Economic Review, American Economic Association, vol. 73(1), pages 31-43, March.
  25. Mihir Desai & Paul Gompers & Josh Lerner, 2003. "Institutions, Capital Constraints and Entrepreneurial Firm Dynamics: Evidence from Europe," NBER Working Papers 10165, National Bureau of Economic Research, Inc.
  26. Gorodnichenko, Yuriy & Peter, Klara Sabirianova, 2006. "Public Sector Pay and Corruption: Measuring Bribery from Micro Data," IZA Discussion Papers 1987, Institute for the Study of Labor (IZA).
  27. Shang-Jin Wei, 2000. "Does Corruption Relieve Foreign Investors of the Burden of Taxes and Capital Controls?," NBER Chapters, in: International Taxation and Multinational Activity, pages 73-88 National Bureau of Economic Research, Inc.
  28. Roy Thurik & Isabel Grilo, 2006. "Latent and actual entrepreneurship in Europe and the US: some recent developments," Scales Research Reports N200514, EIM Business and Policy Research.
  29. Lien, Da-Hsiang Donald, 1986. "A note on competitive bribery games," Economics Letters, Elsevier, vol. 22(4), pages 337-341.
  30. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  31. Parker,Simon C., 2004. "The Economics of Self-Employment and Entrepreneurship," Cambridge Books, Cambridge University Press, number 9780521828130, April.
  32. Lui, Francis T, 1985. "An Equilibrium Queuing Model of Bribery," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 760-81, August.
  33. Roy Thurik & Andreas Freytag, 2006. "Entrepreneurship and its determinants in a cross-country setting," Scales Research Reports H200616, EIM Business and Policy Research.
  34. André van Stel & Roy Thurik & Sander Wennekers & Niels Noorderhaven, 2004. "The role of dissatisfaction and per capita income in explaining self-employment across 15 European countries," Scales Research Reports N200407, EIM Business and Policy Research.
  35. André van Stel & Roy Thurik & Ingrid Verheul, 2004. "Explaining female and male entrepreneurship across 29 countries," Scales Research Reports N200403, EIM Business and Policy Research.
  36. Stefano Scarpetta & Philip Hemmings & Thierry Tressel & Jaejoon Woo, 2002. "The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from Micro and Industry Data," OECD Economics Department Working Papers 329, OECD Publishing.
  37. Levine, Ross & Renelt, David, 1992. "A Sensitivity Analysis of Cross-Country Growth Regressions," American Economic Review, American Economic Association, vol. 82(4), pages 942-63, September.
  38. Simon C. Parker & Martin T. Robson, 2004. "Explaining International Variations in Self-Employment: Evidence from a Panel of OECD Countries," Southern Economic Journal, Southern Economic Association, vol. 71(2), pages 287-301, October.
  39. Christian Bjørnskov & Nicolai Foss, 2008. "Economic freedom and entrepreneurial activity: Some cross-country evidence," Public Choice, Springer, vol. 134(3), pages 307-328, March.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Is Corruption Good for Business?
    by Andrzej Zwaniecki in New Enterprise on 2010-12-09 15:43:11
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:kof:wpskof:07-166. 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: ().

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.