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Regulatory Barriers and Entry in Developing Economies

Author

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  • Bennett, John

    (Royal Holloway, University of London)

  • Estrin, Saul

    (London School of Economics)

Abstract

We model entry by entrepreneurs into new markets in developing economies with regulatory barriers in the form of licence fees and bureaucratic delay. Because laissez faire leads to ‘excessive’ entry, a licence fee can increase welfare by discouraging entry. However, in the presence of a licence fee, bureaucratic delay creates a strategic opportunity, which can result in both greater entry by first movers and a higher steady-state number of firms. Delay also leads to speculation, with entrepreneurs taking out licences to obtain the option of immediate entry if they later observe the industry to be profitable enough.

Suggested Citation

  • Bennett, John & Estrin, Saul, 2006. "Regulatory Barriers and Entry in Developing Economies," IZA Discussion Papers 2150, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp2150
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    References listed on IDEAS

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    Cited by:

    1. Estrin, Saul & Korosteleva, Julia & Mickiewicz, Tomasz, 2009. "Better Means More: Property Rights and High-Growth Aspiration Entrepreneurship," IZA Discussion Papers 4396, Institute of Labor Economics (IZA).
    2. Randolph Luca Bruno, 2006. "Unique Equilibrium in a Model of Rule of Law," LEM Papers Series 2006/16, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    3. John Bennett & Saul Estrin, 2013. "Regulatory Barriers and Entry into a New Competitive Industry," Review of Development Economics, Wiley Blackwell, vol. 17(4), pages 685-698, November.

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    More about this item

    Keywords

    entry; developing economy; entry barriers;
    All these keywords.

    JEL classification:

    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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