Working Paper: CEPR ID: DP6610
Authors: Evgeny Yakovlev; Ekaterina Zhuravskaya
Abstract: What determines the enforcement of deregulation reform of business activities? What are the outcomes of deregulation? We address these questions using an episode of a drastic reform in Russia between 2001 and 2004 which liberalized registration, licensing, and inspections. Based on the analysis of micro-level panel data on regulatory burden, we find that: 1) On average, the reform reduced the administrative costs of firms; but, the progress of reform had a substantial geographical variation. 2) The enforcement of deregulation reform was better in regions with a transparent government, low corruption, better access of the public to independent media sources, a powerful industrial lobby, and stronger fiscal autonomy. 3) Using the exogenous variation in regulation generated by the interaction of reform and its institutional determinants, we find a substantial positive effect of deregulation on net entry and small business employment and no effect on pollution and public health. The results support public choice theory of the nature of regulation and are inconsistent with the predictions of public interest theory.
Keywords: deregulation; enforcement; entry; public choice; reform; regulation; transparency
JEL Codes: H10; K2; K20; L50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| institutional factors (D02) | reform enforcement (P41) |
| reform (P41) | regulatory burden (L51) |
| deregulation (L51) | net entry (D85) |
| deregulation (L51) | small business employment (M13) |
| deregulation (L51) | pollution (Q53) |
| deregulation (L51) | public health (I14) |