Entry barriers, regulation, and growth

Abstract

Over the past decade, GDP growth rates of large continental European countries were notably different from those of other OECD countries, especially the US. Empirical studies show that differences in product market regulations provide one important explanation for this development. This paper addresses this stylised fact and analyses how entry barriers affect long-run growth rates within a Schumpeterian endogenous R&D growth model. It is shown that reductions of entry fees, a shortening of start-up procedures, as well as the deregulation of public ownership industries are positively related with the growth rate of the economy.