Three Essays on Regulation and Entrepreneurship.

Abstract

This dissertation analyzes how government regulations can affect entrepreneurship and small business performance. The first essay focuses on the effects of occupational licensing regulation, which has increased dramatically in importance over the last several decades and currently affects more than one thousand occupations in the United States. I use confidential U.S. Census Bureau micro-data to study the relationships between occupational licensing and key business outcomes. Among findings that shed light on the effect of occupational licensing on entrepreneurship are that occupational licensing regulation does not affect the equilibrium number of practitioners, but substantially reduces their entry and exit rates and that providers of occupational licensing training, namely, schools, are larger and seem to be more profitable in states with more stringent occupational licensing regulation. In the second essay, I explore (with a coauthor) whether businesses started as franchises survive longer than those launched as independent businesses, and whether there is a relationship between state franchise relationship regulation aimed at preventing franchisor opportunism and the survival of franchised businesses. We find the difference in one-year survival rate between franchised and independent businesses to be about five percentage points, and this gap to persist across two and three-year survival rates. State franchise relationship laws, however, do not seem to affect the survival of franchised businesses. In the final essay, I analyze (with a coauthor) how personal bankruptcy laws affect entrepreneurship. Lenient bankruptcy laws may encourage entrepreneurship by limiting the possible negative consequences of business failure. We examine this relationship using variation in state bankruptcy homestead exemptions, and analyze the impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that affected these exemptions. We argue that sole proprietorships are expected to be affected by the differences in homestead exemptions, corporations, because they have limited liability, not to be affected. Consistent with these predictions, entrepreneurs’ choice of legal form of organization does not seem to be affected by homestead exemptions, and we find no evidence of any significant effect of the Bankruptcy Abuse Prevention and Consumer Protection Act on entry rates.