Do Cottage Food Laws Reduce Barriers to Entry for Food Manufacturers?

Abstract States have increasingly adopted cottage food laws across the United States. The laws allow small‐scale food entrepreneurs to produce nonrefrigerated foods in home kitchens and sell them via direct‐to‐consumer outlets. Research has not yet established if the policies are, as intended, supporting start‐up food manufacturing businesses nationally. We estimate a differences‐in‐differences model using state‐level panel data to evaluate whether the passage of cottage food laws impacted the number of manufactured baked good establishments. We find a positive impact on the number of both employer and nonemployer businesses, with a relatively greater proportional impact for nonemployer businesses.