Entry regulation and international trade

ABSTRACT

We use cross-country, cross-industry data to analyse the relationship between entry regulation and international trade. We find robust evidence that entry regulation discourages exports of industries with low natural barriers to entry. This implies that, in international markets, countries with heavy entry regulation have a comparative disadvantage in industries that are technologically easy to enter. Further analysis shows that the result is partly due to the negative impact of entry regulation on productivity.

KEYWORDS:

• Entry regulation
• comparative advantage
• trade
• natural entry

JEL CLASSIFICATION:

• F10
• K20
• L60

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Erratum

Acknowledgement

We thank Robert Feenstra, Loretta Fung, Constance Smith and Yingying Xu for their valuable comments, and Raymond Fisman, Virginia Sarria-Allende and Nathan Nunn for kindly sharing their data.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the Humanities and Social Science Promotion Foundation of Tsinghua University [grant number 2012WKZD010].