(2006) interact industry characteristics with country-level regulation indicators to examine whether regulation-vulnerable industries are more hampered by certain regulations. After controlling for country- and industry-specific factors and using the difference-in-difference approach, they find that entry regulations hamper entry, especially in industries featuring high entry (judging by what happens in the United States). Value added per worker in “high-entry” industries grows more slowly in countries with more onerous regulation on entry. Interestingly, regulatory entry barriers do not hamper entry in corrupt countries, but do so in less corrupt ones. The results are intuitive since de facto enforcement of labor regulations in corrupt countries are less demanding. Not all regulations are bad. Regulations protecting intellectual property rights or enhancing the financial sector lead to a greater entry in industries that need more external finance or research and development. Similarly, using the United Nations Industrial Development Organization’s industry-level data in 45 countries to examine the effects of entry regulations on entry patterns across industries, Ciccone and Papaioannou (2007) find that countries featuring less registration costs see higher entry rates in industries featuring stronger global demand and faster technology changes.<sup>23</sup> Another avenue for entry deregulations to matter is to introduce more productive (new) firms and to change sector composition. Surveying the entry effects of foreign banks, Clarke et al. (2003) show that entering foreign banks are more efficient than local banks in developing countries. Thus, allowing foreign bank entry raises the overall efficiency level of the banking sector—both due to the composition effects and the rising competitive pressure for domestic firms.

Besides efficiency, entry deregulations also enhance equity by facilitating job creation. Yakovlev and Zhuravskaya (2007) examine the policy experiment in Russia between 2001 and 2004 that dramatically simplified registration and licensing procedures and reduced inspections for existing firms. The new law required a “one-stop shop” and no more than a week for registration. Moreover, each inspection agency can inspect a business no more than once in two years. Licenses are valid for no less than five years. They want to understand whether the deregulation reforms reduced regulation burdens, and whether regulation burdens affected entry, small business density and public goods provision. They first show that the national deregulation experiments reduced regional regulation burdens using the repeated cross sectional firm data, controlling for regional fixed effects, firm characteristics and regional characteristics. More interestingly, they allow the deregulation effects to depend on initial regulation burden and local institutional details (such as

> 23 The entry effects of deregulation can sometimes be achieved without explicit entry deregulation. Long and Zhang (2009) find that clustering (i.e., allowing firms producing different parts of the same product to be located together) reduces financing needs, increases entry and competition, and therefore improves export and productivity.

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