The Impact of Business Environment Reforms on New Firm Registration

We use panel data on the number of new firm registrations in 92 countries to study how the magnitude of reforms affects its impact on new firm registrations. We find that small reforms, in general less than 40% reduction in costs, days or procedures required for business registration, do not have a significant effect on new firm creation. This suggests that small reforms do not have the intended effect on private sector development. We also find important synergies in multiple reforms of two or more business environment indicators. Finally, we show that countries with relatively weaker business environments require relatively larger reforms in order to impact new firm growth. These results can be helpful to motivate policymakers to make larger, broader, reforms. JEL Classification: G18, G38, L51, M13