Economics in a picture
"Firm on the Spot" (Empresa na Hora) fostered firm creation in Portugal
The reform “Firm on the Spot” was introduced in 2005 and radically reduced entry costs for firms in Portugal. Before the reform, starting a business implied a long and convoluted bureaucratic procedure, with many forms to fill in and several institutional actors involved. It would take between two to three months to start a business in Portugal. After the reform, the duration of this process decreased to less than one hour. It also involved a substantial reduction in the monetary costs associated with firm creation. Such a change in the business environment allowed the country to improve its position in the “Ease of Doing Business Index” released every year by the World Bank, moving from the 113th position before the reform to the 33rd position in 2010.
Félix and Maggi (2019) study the staggered implementation of the “Firm on the Spot” in the Portuguese municipalities and show that the reform succeeded in increasing business entry from 2005 to 2008. The estimates suggest that in this period the number of new firms per 1,000 residents in the reformed municipalities increased on average 25% per year relatively to non-reformed municipalities. The results also show that the reform led to a rise in employment in the reformed municipalities.
For further details see Félix and Maggi (2019): “What is the impact of increased business competition?”, Banco de Portugal Working Papers 2019/04.
Prepared by Sónia Félix and Chiara Maggi. The opinions expressed in the article are those of the authors and do not necessarily coincide with those of Banco de Portugal or the Eurosystem. Any errors and omissions are the sole responsibility of the authors.
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