Entry Costs, Industry Structure, and Cross-Country Income and TFP Differences
Entry costs vary dramatically across countries. To assess their impact we construct a model with endogenous entry and operation decisions by rms and calibrate it to match the U.S. distribution of firms by size. Higher entry costs lead to greater misallocation of productive factors and lower TFP and output. In the model, countries in the lowest decile of the entry costs distribution have 1.35 to 1.50 times higher TFP and 1.57 to 1.82 times higher output per worker than countries in the highest decile. As in the data, higher entry costs are associated with a larger informal sector and overall number of operating firms, a smaller number of legally registered firms, and a higher concentration of employment in the smallest and largest firms.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:red:sed010:964. 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: (Christian Zimmermann)
If references are entirely missing, you can add them using this form.