Secrecy in administration may undermine economic growth by creating entry barriers for entrepreneurs. Utilizing a staggered reform that enhanced transparency in administration and governance, I examine whether increased transparency reduces the bureaucratic cost of entry and fosters entrepreneurship. A difference-in-difference strategy exploiting this change shows that the firm creation increased by 3.9% in the affected states compared to other states. Examining the effect of national RTI 2005 demonstrates that entrepreneurs preempt the administrative learning delays and prefer setting up businesses in states with prior state transparency laws. The study suggests that corruption and administrative inefficiency are critical inhibitors of business formation.

Key Words— Transparency, Acco...[ Read more ]

Secrecy in administration may undermine economic growth by creating entry barriers for entrepreneurs. Utilizing a staggered reform that enhanced transparency in administration and governance, I examine whether increased transparency reduces the bureaucratic cost of entry and fosters entrepreneurship. A difference-in-difference strategy exploiting this change shows that the firm creation increased by 3.9% in the affected states compared to other states. Examining the effect of national RTI 2005 demonstrates that entrepreneurs preempt the administrative learning delays and prefer setting up businesses in states with prior state transparency laws. The study suggests that corruption and administrative inefficiency are critical inhibitors of business formation.

Key Words— Transparency, Accountability, Governance, Growth, Entrepreneurship