Business Regulation and Economic Performance
Norman V. Loayza, Luis Serv n
World Bank Publications, Jan 11, 2010 - Business & Economics - 290 pages
The Schumpeterian process of 'creative destruction' is an essential ingredient of a dynamic economy. In many countries around the world, however, this process is weakened by pervasive regulation of product and factor markets. This book documents the regulatory obstacles faced by firms, particularly in developing countries, and assesses their implications for firm renewal and macroeconomic performance. Combining a variety of methodological approaches--analytical and empirical, micro and macroeconomic, single- and cross-country-- the book provides evidence that streamlining the regulatory framework would have a significant social pay-off, particularly in developing countries that are also burdened by weak governance. The book's chapters trace out analytically and empirically the links between microeconomic policies and distortions, on the one hand, and aggregate performance in terms of productivity, growth and volatility, on the other. The volume adds to a novel but increasingly influential literature that seeks to understand macroeconomic phenomena from a microeconomic perspective, and derive the relevant lessons for development policy. Such literature is still fairly scarce in the case of industrial countries, and virtually in its infancy for developing countries.
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adjustment costs adjustment functions aggregate productivity allocative efficiency annex average bankruptcy barriers burden calculations capital chapter Chile coefficient Colombia competition component correlation cross-country deregulation developing countries economic growth effect of product effect of regulation empirical employment endogeneity entry and exit estimated evidence firm dynamics firm turnover fiscal regulation Fraser Institute Galgau GDP per capita governance growth rate Haltiwanger Heritage Foundation higher index turnover indices industry informality innovation institutions index instrumental variable interaction investment labor productivity labor productivity growth labor regulation Latin American Latin American countries Loayza macroeconomic macroeconomic performance macroeconomic volatility markup measures ment negative Nicoletti nomic OECD OECD countries output overall Oviedo P-value percent plants product market regulation R-squared reallocation regression regulation index robust sample Scarpetta sector shadow economy shocks shortages significant simulated Source tion trade turnover rates Uruguay workers World Bank