A replication of ‘Entry regulation and entrepreneurship: a natural experiment in German craftsmanship’

Abstract

Rostam-Afschar (Empir Econ 47:1067–1101, 2014) analyzes the impact of the deregulation of the German Trade and Crafts Code of 2004 on entrepreneurial activity, using German microcensus (MC) data. He finds a uniform positive effect on market entry in partially and fully deregulated trades and no change in exit probabilities. We replicate and extend this study. Most importantly, we generate a novel classification scheme that aims to achieve an improved identification of crafts trades in the microcensus. It is necessary to remove non-craftsmen from the analysis as the policy change exclusively pertains to the crafts sector. In contrast to Rostam-Afschar’s findings, the increase in self-employment and entry is more pronounced in the completely deregulated B1-trades rather than the partially deregulated A-trades. In addition, exit probabilities in fully deregulated trades do not remain constant but rather increase.