Determinants of the cost of starting a business in Mexico

We construct a panel data at the state level in México for the years 2006, 2008 and 2011 in order to investigate the impact that entry deregulation efforts, states’ financial strength, crime level, and potential market profitability have on the cost of opening new businesses in Mexico, where this cost is taken from the Doing Business in Mexico report of the World Bank. Using a model that controls for both regional fixed effects and endogenous effects, we find that our measures of entry deregulation and states’ financial strength are associated with a reduction in the cost of opening a new business, while higher levels of crime and higher GDP per capita tend to increase it.