Barriers to Entrepreneurship - World Bank

Causality• There could be omitted variables that jointly drive the propensity toenter and the degree of bureaucratic entry barriers: but the resultshold when we instrument entry regulation with legal origin.• Perhaps countries with large “high natural entry” industries have astrong entrepreneurial culture and select low entry regulation: butthe results hold when we restrict the sample to industries that arerelatively small. These industries are unlikely to be responsible forentry barriers since they have limited political clout.• Countries with more untrustworthy populations may erect higherbureaucratic barriers so as to screen would-be entrepreneurs morecarefully. If such barriers were meant to screen entry efficiently,we should expect them to be particularly effective in low-income/high-corruption countries relative to high-income/low-corruptioncountries. We find they are not. Entry regulations have adverseeffects primarily in countries that are more developed/less corrupt.6