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The effect of legal entry barriers on entry rate, exit rate, and economic performance : An application of difference in difference method to a Korean case

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  • The effect of legal entry barriers on entry rate, exit rate, and economic performance
  • Lee, Kwon In
  • The Association of Korean Economic Studies


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Title The effect of legal entry barriers on entry rate, exit rate, and economic performance
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Sub Title

An application of difference in difference method to a Korean case

Material Type Articles
Author(English)

Lee, Kwon In

Publisher

[Seoul]:The Association of Korean Economic Studies

Date 2007
Pages 20
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Subject Industry and Technology < Manufacturing
Industry and Technology < Entrepreneurship
Government and Law < Laws and Legislation
Holding The Association of Korean Economic Studies

Abstract

This empirical study shows how entry regulations deter the entry and exit rates of firms. The effects of legal entry regulation on the entry and exit rates taken together, entry regulation in itself inevitably decreases the degree of competition. Specifically, this paper shows that legal entry regulations at the four-digit level industries provided enough rent for incumbent firms in 1992 before the regulatory reform. The statistical analysis in this paper also show that firms belonging to industries regulated by legal entry barriers in 1992 but not regulated in
2001 because of subsequent legal entry deregulation have lost 15.2% of economic rent in terms of operating income to sales. This result is derived from comparing two cohorts of firms, a “treatment” cohort of firms belonging in industries that were under legal regulations in 1992 that were later deregulated in 2002, and a “control” cohort of firms that faced legal barrier regulations continuously over the both periods. (The rest omitted)

User Note

This paper was presented at WEA conference in 2005.