Entry Barriers, Idiosyncratic Distortions, and the Firm-Size Distribution
This paper studies the interaction between entry barriers and idiosyncratic distortions in the context of a standard model of firm dynamics. It derives a strategy to infer entry barriers based on the combination of cross-country data on average fir...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/735701569588825933/Entry-Barriers-Idiosyncratic-Distortions-and-the-Firm-Size-Distribution http://hdl.handle.net/10986/32486 |
| Summary: | This paper studies the interaction
between entry barriers and idiosyncratic distortions in the
context of a standard model of firm dynamics. It derives a
strategy to infer entry barriers based on the combination of
cross-country data on average firm size, cross-country
estimates of idiosyncratic distortions, and equilibrium
conditions of the theory. It finds sizable entry barriers
that correlate positively with income per-capita. The TFP
gains from complete reversals of distortions range between
20 and 50 percent. Idiosyncratic distortions are most
distortive in low income countries whereas entry barriers
are relatively more detrimental in advanced economies. The
study also finds that distortions tend to mitigate each
other's negative effect on TFP. |
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