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The negative impact of barriers to entry on income inequality
Author(s) -
Overstreet Dallin
Publication year - 2020
Publication title -
economic affairs
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.24
H-Index - 18
eISSN - 1468-0270
pISSN - 0265-0665
DOI - 10.1111/ecaf.12426
Subject(s) - barriers to entry , inequality , point (geometry) , government (linguistics) , gini coefficient , economic inequality , business , public economics , economics , labour economics , industrial organization , mathematical analysis , linguistics , philosophy , geometry , mathematics , market structure
Abstract Barriers to entry such as fees, licensing, or educational requirements make it more difficult to start businesses. Problematically, many barriers to entry are due to regulatory capture and serve only to benefit incumbent firms. These regulations, which are created by government, often make it exceedingly difficult for low‐income individuals to start new businesses, denying individuals access to higher‐paying occupations. I estimate two models and find that barriers to entry increase income inequality. A one‐point decrease in the World Bank's ease of starting a business score equates to a 0.15–1.25‐point increase in the Gini coefficient.