Are Burdensome Registration Procedures an Important Barrier on Firm Creation? Evidence from Mexico

There is increasing concern that the difficulty of obtaining firm operation licences in developing countries may decrease firm creation and increase informality. We estimate the effect on new firm creation/registration of a program that speeds up firm registration procedures and makes them more transparent. The program was implemented in Mexico in different municipalities at different dates. Our preferred estimates suggest that new firm registration increased by around 4% in eligible industries. Most of the effect is temporary, being concentrated in the first 10 months after the program is implemented. This suggests that the program’s effect may operate through registering existing firms instead of spurring creation of new ones. We compare this magnitude to some benchmarks to assess its size.