Leora F. Klapper Senior Economist DECRG-FPD lklapper@[email protected] 1-202-473-8738

Leora F. KlapperSenior Economist DECRG-FPD

[email protected]

Why a database on entrepreneurship?

To answer:

• What drives firm creation and entrepreneurship?

• What policies are needed to create and support the emergence of new entrepreneurs? • Use for Monitoring and Evaluation

• How can greater formal sector participation / corporate registration be encouraged?

• What are the benefits for firms that join the formal economic sector?

Using data from the registrar of companies

• This improves upon previously used datasets in that it includes a large number of private firms and all industrial sectors, including a large fraction of new & small companies.

• Challenges in comparing data across countries include differences in registration and annual filing requirements; the identification of exited firms; re-registrations; and decentralized registry systems.

• This data can be used to benchmark changes in the composition of the private sector over time and study the impact of regulatory, political, and macroeconomic institutional changes on entrepreneurship and growth.

New Economic Units

Formal Sector Informal Sector

Self Employment Micro Businesses

PartnershipsCompanies

Civil Law Common Law

New Businesses

Sole ProprietorshipSole Proprietorship Companies

Methodology

• Panel A: Total and new registrations recorded:

- Total firms- New firms- Year-end 2000-05

• Panel B: Number of corporations, by sector and size:

- By sector: Manufacturing, Services, Financial, Wholesale & Retail Trade

• Panel C: The Role of Corporate Registries:Panel C: The Role of Corporate Registries:

Survey Structure

Panel C: The Role of Corporate Registries

• What information are firms required to register? - Is registration compulsory? - Incorporations/ closings/ re-registrations - Is annual financial information compulsory?

• How do firms register?

• What information does the Registrar collect?

- Corporate registrations, Internet domain names, Patents

• How is Registrar data distributed? - Accessibility by creditors, suppliers, lenders and private vendors (i.e. D&B)

• What is the relationship with new and total registrations?

• What is the relationship with the business environment?

Region Country Methodology

Africa Congo Legally oblige all new business to notify the statistical agency when they start their activity

Europe Denmark Creating the first European registry of “active” entrepreneurs

LAC El Salvador Using entrepreneurship ratios for monitoring and evaluation of economic policies

MENA Jordan Introduced e-registration in 2002

M&E: International Reforms

Relationship with the Business EnvironmentRelationship with the Business Environment

• Scatter-plots / Bivariate tests

• Multivariate tests

ConclusionsConclusions

• Corporate registry data can be an important tool for researchers and policymakers to study the size and growth of the private sector.

• Benchmarks can be constructed to study the impact of reforms: Entry rates can be used to measure the success of private sector development policies and regulatory and legal reforms.

• The process of gathering the data becomes a valuable research tool to diagnose problems related to entrepreneurship.

• This data can be used to empirically test the many factors that affect business creation and to support the findings in other studies (e.g. Doing Business).

Reforms that Affect Business Statistics: The Algerian Case

New sectoral requirements/ re-registrations

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

1995 1996 1997 1998 1999 2000 2002 2003

.

Panel A: Summary statistics, by regionPanel A: Summary statistics, by region

7.6%

6.7%

8.3%8.7%

10.0%

3.1%

6.2%

3.8%

0.2%

1.4%

0%

2%

4%

6%

8%

10%

12%

Africa and MiddleEast

Asia Europe and CentralAsia

Latin America andthe Caribbean

IndustrializedCountries

Entry rates Business density rates

19 5 20 10 29

Average entry rate 2003-2005



Average Business Density 2003-2005

49

0%

10%

20%

30%

40%

50%

Wholesale & RetailTrade

Finance Insurance &Real Estate

Industry Services

Industrialized Countries Developing Countries

Panel B: Summary statistics by sectorPanel B: Summary statistics by sector

0%

20%

40%

60%

80%

100%

Canada Madagascar

Wholesale & Retail Trade Finance Insurance & Real Estate Industry Services

Panel B: Summary statistics by sectorPanel B: Summary statistics by sector

Panel C: What information does the Registrar collect?

0%

10%

20%

30%

Africa and MiddleEast

Europe andCentral Asia

Latin Americaand the

Caribbean

Asia Industrializedcountries

real estate registration internet domain names patents

Panel C: What information are firms required to register?

0%

20%

40%

60%

80%

100%

Africa andMiddle East



Caribbean


Annual financial statements Firms closures

Panel C: How do firms register?

0%

20%

40%

60%

80%




Caribbean


Can firms registrer electronically? Is e-registration required?

Panel C: How is Registrar data distributed?

0%

20%

40%

60%

80%




Caribbean


Can data be accessed electronically? Is there a fee?

0%

2%

4%

6%

8%

10%

Africa and Middle East Asia Industrialized Countries Europe and Central Asia Latin America and theCaribbean

Entry

rate

s

With e-registration Without e-registration

0%

1%

2%

3%

4%

5%

Africa and Middle East Asia Industrialized Countries Europe and Central Asia Latin America and the Caribbean

Busin

ess d

ensit

y


Panel C: What is the relationship with new and total registrations?What is the relationship with new and total registrations?

9.0

2.3

18.9

0

5

10

15

20

Average Duration in days Average Number of Procedures Average cost of entry

Difference between countries with and without e-registration

32

7.7

41

10

0

10

20

30

40

50

Average Duration in days Average Number of Procedures


Panel C: What is the relationship with the business environment?What is the relationship with the business environment?

Panel C: EBR Country CasesEBR Country Cases

Evolution of Firm registration 1993-2005 (Guatemala, Sri Lanka and Jordan)

Stages of the EBR implementation / Evolution of firm registration (Guatemala)

0

5000

10000

15000

20000

25000

30000

35000

40000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Guatemala Sri Lanka Jordan EBR Implementation

Active Modernization planInactive Modernization plan

0

10000

20000

30000

40000

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

EBR implementation

Entry rate

b=.891 p=0.00, R^2=0.21, obs=80

0

5

10

15

20

0 10000 20000 30000 40000 50000

GDP per capita

Density rate

b=1.31, p=0.00, R2 =0.26, obs=82

0

5

10

15

20

25

0 10000 20000 30000 40000 50000

GDP per capita

GDP per capita GDP per capita

Scatter Plots

Cost of starting a business Governance

Entry rate (percent)

b=-.087, p=0.00, R2 =0.17, obs=63

0

5

10

15

20

0 20 40 60Cost to start a business

Entry rate (percent)

b=1.57, p=0.00, R2 =0.23, obs=81

0

5

10

15

20

-2 -1 0 1 2Governance (Kraay indicators average)

Business Density Rates Entry Rates

Log of GDP per 1.426 0.614 0.681 1.093 0.410 0.192 capita [0.00]*** [0.05]* [0.06]* [0.00]*** [0.13] [0.64] GDP growth 0.191 0.286 [0.32] [0.04]** Cost to start a -0.069 -0.064 business [0.01]*** [0.01]*** Governance index 1.204 1.331 (Kauffman, et al.) [0.07]* [0.08]* Constant -8.930 -0.176 -2.215 -2.212 6.062 6.030 [0.00]*** [0.95] [0.41] [0.22] [0.02]** [0.06]* Observations 80 64 82 78 62 80 R-squared 0.26 0.25 0.28 0.23 0.2 0.24

Multivariate Test

Documents

Leora F. Klapper Senior Economist DECRG-FPD lklapper@[email protected] 1-202-473-8738