Adapted from Leora F. Klapper & Juan Manuel Quesada Delgado Development Economics Research Group Finance and Private Sector Development The World Bank
Entrepreneurship and
Economic Development
Why a study on economics and entrepreneurship?
• To answer the demand of Governments and Policy Makers:
• Diagnosis of private sector • Monitoring and Evaluation of policies • Study the impact of regulatory, political, and
macroeconomic institutional changes • To better understand what drives
entrepreneurs to transition from the informal to the formal sector
• How can greater formal sector participation / corporate registration be encouraged
Requirement: To gather comparable data at the international level using a methodology that can be applied across heterogeneous legal, economical and political systems. Then Analysis the data for policy
Questions: – What do we measure? – How do we measure it? – Where do we measure? – Sources of information
How?
To define a lower common denominator
Motto
What do we measure?:
Entrepreneurial Activity The activities of an individual or a
group of individuals aimed at initiating economic activities in the formal sector under a legal form
of business.
How do we measure?
Unit: Business Any economic unit of the formal sector
incorporated as a legal entity and registered in a public registry, which is
capable, in its own right, of incurring liabilities and of engaging in economic
activities and transactions with other entities.
Where do we count? New Economic Units
Formal Sector Informal Sector
Self Employment Micro Businesses
Partnerships Companies
Civil Law Common Law
New Businesses
Sole Proprietorship Sole Proprietorship Companies
Information source
The business Registries
Reasons: • It’s the first step to enter the formal sector • They tend to be the source of information for other
government agencies Challenges:
• Differences in registration and annual filing requirements; identification of exited firms; re-registrations; paper based registries and decentralized registry systems.
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: 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:
Survey Structure
6.7%
8.7%10.0%
8.3%
7.6%
3.1%
6.2%
3.8%
0.2%1.4%
0%
3%
6%
9%
12%
Africa and MiddleEast
Asia Europe and CentralAsia
Latin America andthe Caribbean
IndustrializedCountries
Entry rates Business density rates
19 5 20 10 29
Panel A: Summary statistics, by region
Average entry rate 2003-2005
ü
Panel A: Summary statistics, by region
Average Business Density 2003-2005
49
Panel A: Summary statistics, by region
Panel B: Summary statistics, by sector
0%
10%
20%
30%
40%
50%
Wholesale & RetailTrade
Finance Insurance &Real Estate
Industry Services
Industrialized Countries Developing Countries
0%
20%
40%
60%
80%
100%
Canada Madagascar
Wholesale & Retail Trade Finance Insurance & Real Estate Industry Services
ü
Panel B: Summary statistics, by sector
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?
• Case Studies
Panel C: What information does the Registrar collect?
0%
10%
20%
30%
Africa andMiddle East
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
Europe andCentral Asia
Latin Americaand the
Caribbean
Asia Industrializedcountries
Annual financial statements Firms closures
Panel C: How do firms register?
0%
20%
40%
60%
80%
Africa and MiddleEast
Europe andCentral Asia
Latin Americaand the
Caribbean
Asia Industrializedcountries
Can firms registrer electronically? Is e-registration required?
Panel C: How is Registrar data distributed?
0%
20%
40%
60%
80%
Africa andMiddle East
Europe andCentral Asia
Latin Americaand the
Caribbean
Asia Industrializedcountries
Can data be accessed electronically? Is there a fee?
0%
1%
2%
3%
4%
5%
6%
Africa and MiddleEast
Asia IndustrializedCountries
Europe and CentralAsia
Latin America and theCaribbean
Bus
ines
s de
nsity
With e-registration Without e-registration
ü
Panel C: What is the relationship with new and total registrations?
0%
2%
4%
6%
8%
10%
Africa and MiddleEast
Asia IndustrializedCountries
Europe and CentralAsia
Latin America andthe Caribbean
Ent
ry ra
tes
With e-registration Without e-registration
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
41
107.7
0
10
20
30
40
50
Average Duration in days Average Number of Procedures
With e-registration Without e-registrationü
Panel C: What is the relationship with the business environment?
0
10000
20000
30000
40000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 20050
2000
4000
6000
8000
10000
Guatemala Sri Lanka Jordan
0
10000
20000
30000
40000
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
ü
Panel C: EBR Country Cases
Evolution of Firm registration 1993-2005 (Guatemala, Sri Lanka and Jordan)
Stages of the EBR implementation / Evolution of firm registration (Guatemala)
Active Modernization plan Inactive Modernization plan
EBR implementation
EBR Implementation
Relationship with the Business Environment
• Scatter-plots / Bivariate tests • Multivariate tests
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
ü
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
Entry rate (percent)
b=-.087, p=0.00, R 2 =0.17, obs=63
0 5
10 15 20
0 20 40 60 Cost 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 2 Governance (Kraay indicators average)
Governance Cost of Starting a Business
ü
Business Density Rates Entry Rates
Log of GDP per capita
1.426 [0.00]***
0.614 [0.05]*
0.681 [0.06]*
1.093 [0.00]***
0.410 [0.13]
0.192 [0.64]
GDP growth 0.191 [0.32]
0.286
[0.04]**
Cost to start a business
-0.069 [0.01]***
-0.064
[0.01]***
Governance index (Kauffman, et al.)
1.204 [0.07]*
1.331 [0.08]*
Constant -8.930 [0.00]***
-0.176 [0.95]
-2.215 [0.41]
-2.212 [0.22]
6.062 [0.02]**
6.030 [0.06]*
Observations R-squared
80 0.26
64 0.25
82 0.28
78 0.23
62 0.2
80 0.24
Multivariate Test
Additional Information IFC Entrepreneurship Data Base Web Page: http://www.ifc.org/ifcext/sme.nsf/Content/Entrepreneurship+Database
• Viewpoint: “Entrepreneurship and firm formation across countries”
• Research paper: “Entrepreneurship: New Data on Business Creation and How to Promote It”
• Data Base
• Juan Manuel Quesada: [email protected] • Leora Klapper: [email protected] Contacts: