Barriers to entry, entrepreneurship and income inequality within the USA

Abstract

PurposeCross-country studies have shown that higher costs to starting a business tend to reduce entrepreneurship (Chambers and Munemo, 2019) and that an unfavorable environment for business can increase poverty and income inequality (Chambers et al., 2019a; Djankov et al., 2018). Building on the current literature, the authors test whether barriers to starting a business at the state and city level in the USA are associated with changes in entrepreneurship and income inequality.Design/methodology/approachMeasures of entrepreneurship (establishment entry rate and exit rate) are regressed on measures of barriers to entry in a cross-section of 50 states as well as a cross-section of 73 cities in the USA. Further, the authors regress measures of income inequality on measures of barriers to entry using the same two cross-sections. State level data on barriers to entry are from Teague (2016), published in the Journal of Entrepreneurship and Public Policy. City level data on barriers to starting a business are from the Doing Business in North America (DBNA) dataset.FindingsResults show that there is a negative and significant association between barriers to starting a business and the rate of firm exit. A standard deviation increase in barriers to entry is associated with a five percent decrease in the firm exit rate at the state level. The authors find only limited evidence that barriers to entry are associated with income inequality.Originality/valueDespite a large volume of scholarship on how regulation and barriers to entry influence entrepreneurship, no study (to the authors’ knowledge) has investigated how general entry regulation affects the entry or exit rate of establishments at the state or municipal level in the USA.

A Critical Analysis of the Small Business and Startup Community in the U.S. State of Maine: A Sustainable Way Forward

“…In their 2005 article "Global Entrepreneurship Monitor: Data Collection Design and Implementation 1998-2003 surveys and unstructured interviews as two methods of data collection. As the most common method of primary data collection, surveys have, since the 1930's, become the standard research tool within the social sciences, marketing, and official statistics (Nayak and Narayan, 2019).…”

“…Using the Oxford Dictionary definition that a survey "is an investigation of the opinions or experiences of a group of people based on a series of questions," Nayak and Narayan (2019) elaborate that the survey generally consists of pre-established questions designed to collect certain "data from a particular group of people regarding their preferences, opinions, behavior, or factual information, depending on the survey purpose." When designing the survey for this study, the Google Forms tool was chosen for its versatility and ease of use.…”

“…When designing the survey for this study, the Google Forms tool was chosen for its versatility and ease of use. Nayak and Narayan (2019) claim that the Google Forms tool gains much of its strength because the surveyor can customize the way in which they format the questions, i.e., text responses, checkboxes, or a scale. Further, they state that this format is useful when conducting a cross-sectional study.…”