No. 365 - Measuring the aggregate effects of simplifying firm creation in Italy

A series of reforms passed in Italy in 2010 reduced the expected duration of registration and startup procedures for new businesses. Previous research found that procedural simplifications of this nature have a positive impact on the selection of firm entry in the short run and consequently on their productivity. These studies, based on natural policy experiments and lacking precise estimates for the duration of the startup process in Italy, are not designed to predict both the long-term effects and the aggregate implications of such reforms. Using a general equilibrium framework with heterogeneous firms and households, and micro-level data for Italian households, I provide an estimate for average startup times in Italy and find that further reforms of a similar nature could produce a significant increase in aggregate firm productivity and output, which is qualitatively in line with previous findings.