Industry growth, firm size and the business environment

In particular, we find that small firm dominated industries benefit from less stringent and more business friendly regulations associated with starting and closing a business, licensing requirements, exporting and importing, employment hiring and firing decisions, paying taxes, protecting investors and obtaining credit. We find that the effect of the business environment on small firm dominated industries varies across country income groups. While employment regulations and investor protection regulations matter the most in low income countries, regulations associated with exporting and importing are particularly important for middle income countries while there is no evidence of a disproportionate impact of the business environment on small firm dominated industries in high income countries. Our findings have implications for policy interventions in creating an enabling environment for the growth of micro and small enterprises. (Author abstract)