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Heterogeneity in the Effect of Regulation on Entrepreneurship and Entry Size

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  • Silvia Ardagna
  • Annamaria Lusardi
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    Abstract

    We use cross-national harmonized micro data from a broad sample of developed and developing countries and investigate the heterogeneity of the effect of entry, contract enforcement regulation, and financial development on both the decision to become an entrepreneur and the level of employment of newly created businesses. We focus on the interaction between the level of regulation and financial development and some individual characteristics that are important determinants of entrepreneurship, such as gender, business skills, and social networks. We find that entry regulation moderates the effect of business skills, while accentuating the effect of gender, even after accounting for the level of financial development. Specifically, women are more likely to enter into entrepreneurship in countries with higher levels of entry regulation, but mainly because they cannot find better work. This effect is also more pronounced in countries that are less financially developed. Furthermore, individuals who report having business skills are less likely to enter entrepreneurship in countries with higher entry regulation. Finally, we also find that individuals who know other entrepreneurs are less likely to start large businesses in countries with higher levels of entry and contract enforcement regulation. (JEL: K23, L26, L51) (c) 2010 by the European Economic Association.

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    Bibliographic Info

    Article provided by MIT Press in its journal Journal of the European Economic Association.

    Volume (Year): 8 (2010)
    Issue (Month): 2-3 (04-05)
    Pages: 594-605

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    Handle: RePEc:tpr:jeurec:v:8:y:2010:i:2-3:p:594-605

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    Web page: http://www.mitpressjournals.org/jeea

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    Cited by:
    1. Malevergne, Y. & Saichev, A. & Sornette, D., 2013. "Zipf's law and maximum sustainable growth," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1195-1212.
    2. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2010. "Corporate taxation and the size of new firms: Evidence from Europe," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3607199, Tilburg University.
    3. ANT Bozkaya & William R. Kerr, 2009. "Labor Regulations and European Private Equity," Working Papers CEB 09-055.RS, ULB -- Universite Libre de Bruxelles.
    4. Baumann, Florian & Brändle, Tobias, 2012. "Self-employment, educational attainment and employment protection legislation," Labour Economics, Elsevier, vol. 19(6), pages 846-859.

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