Deregulation of entry has been a core component of recent market reforms in many countries. There are a number of channels through which reductions in entry barriers could influence aggregate productivity. First, theoretical models show that entry barriers generate misallocation by introducing distortions to profitability that inhibit reallocations of market shares across firms and reduce incumbent firms’ innovation incentives (Schivardi and Viviano, 2011 and Hsieh and Klenow, 2009). Second, the increase in competitive pressure entrants generate leads the least productive firms to exit and reallocates market share. Third, new firms are often the conduits of new technologies, products and processes that advance the technological frontier (Aghion et al., 2009). Finally, the threat of entry may spur incumbents to innovate