Abstract
Transaction costs are the costs to protect property rights. Institutions are shaped in order to control transaction costs in society. Studies have been developed to measure transaction costs both at the macro and microeconomic levels. Entry costs, i.e., the cost to start up a new business are considered a proxy for business environment quality, being also interpreted as a proxy to transaction cost measurement. This paper presents new elements in order to amplify the potential of research in business environment, particularly business entry costs. It stresses the limitation related to two theoretical points: first, the near decomposability of one complex transaction, and second, the complementarity between ex-ante and ex-post transaction costs, both related to the methodology adopted to measure business entrance costs.
Highlights
High entry cost of firms in markets is seen as a signal of poor business environment (DJANKOV et al, 2002)
This paper presents new elements in order to amplify the potential of research in business environment, business entry costs
The contribution of the literature about measuring transaction costs is largely recognized as a proxy to business environment measurement, but it should avoid falling in the trap of presenting transaction costs approach as a panacea
Summary
High entry cost of firms in markets is seen as a signal of poor business environment (DJANKOV et al, 2002). It raises useful elements that contribute to deepen the understanding and limitations of methodologies to measure transaction costs, the potential relations between ex-ante and ex-post transaction costs. This is the basic contribution of the present paper which is structured in five parts. In the second it discusses the concept of transactions and transaction costs in its multidimensional structure, in the third part the approaches to transaction cost measurement are discussed, and in the fourth part an amplification of methodology is suggested.
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