This paper studies the interaction between barriers to firm entry and distortions to allocative efficiency in a standard model of firm dynamics. We derive a strategy to infer entry barriers based on cross-country differences in the firm size distribution and idiosyncratic distortions. The inferred barriers resemble regulation-based indicators in advanced economies but are substantially higher in middle- and low-income countries. Regulation-based indicators cannot account for cross-country differences in average firm size and underestimate the aggregate productivity gains associated with their removal by up to 8 percent on average.
Fattal-Jaef, Roberto N.
"Entry Barriers, Idiosyncratic Distortions, and the Firm Size Distribution."
American Economic Journal: Macroeconomics,
Firm Behavior: Theory
Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
Business Taxes and Subsidies including sales and value-added (VAT)
Production, Pricing, and Market Structure; Size Distribution of Firms
Industry Studies: Manufacturing: General