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How is registering a business like getting married?

Yara Salem's picture

Editor's Note: Yara Salem is a Private Sector Development Specialist with the Doing Business project and manages the Starting a Business indicator.

We know from Doing Business data that burdensome licensing procedures are a significant obstacle for firm registration. But it looks like firm registration is not the only thing that suffers from these kinds of bureaucratic hurdles. A study I ran across recently (Changing the Price of Marriage: Evidence from Blood Test Requirements) suggests that even matters much closer to the heart are affected in a similar way.

The study examined the impact of changes in the 'price' of marriage on the marriage decision - price being understood as the cost associated with hurdles like passing a blood test requirement (BTR). (BTRs were originally required to screen for communicable diseases, but have been rendered obsolete by advances in medicine.) According to the study:

Using a within-group estimator that holds constant state and year effects and exploits variation in the repeal dates of BTRs across states, we find that BTRs are associated with a 5.7% decrease in marriage licenses issued by a state. Using individual-level marriage license data from 1981-1995, we find that about half of this effect is due to couples seeking marriage licenses in other states, with the other half due to deterred marriages.

In the Doing Business project, we find that government regulations can have a big impact on an entrepreneur's decision to start a business. In economies where regulations are excessively complicated, the entrepreneur either registers somewhere else where regulations are simpler and easy to understand and comply with, or simply works informally with no registration at all.

Comments

its like before i say "I DO" - there is something to do -> the due-deligence: to avoid adverse selection.. Of course there is a course of adverse selection: at the very minimum its "moral hazard". adverse selection and moral hazard cause financial instability and in marriage it's called - therapy and god forbid no - a costly trip to the law office Thanks for the article, it's quite an interesting read. Cheers Olga-Lednichenko

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