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Economic Freedom and entrepreneurial Activity Some Cross-Country Evidence

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  • Christian Bjørnskov
  • Nicolai J. Foss

Abstract

While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use measures of economic freedom from the Economic Freedom of the World database to examine which elements of economic policy making and the institutional framework are responsible for the supply of entrepreneurship Our data on entrepreneurship are derived from the Global Entrepreneurship Monitor. The combination of these two datasets is unique in the literature. We find that the size of government is negatively correlated with entrepreneurial activity but that sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.

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Bibliographic Info

Paper provided by DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies in its series DRUID Working Papers with number 06-18.

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Date of creation: 2006
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Handle: RePEc:aal:abbswp:06-18

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Keywords: Economic freedom; entrepreneurship; cross-country variation;

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Citations

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Cited by:
  1. Garcia-Murillo, Martha & Velez-Ospina, Jorge Andres & Vargas-Leon, Patricia, 2012. "Where should governments invest? The impact of economic, political, social and technological factors on the formation of new firms," 23rd European Regional ITS Conference, Vienna 2012 60400, International Telecommunications Society (ITS).
  2. Almas Heshmati & Dan Johansson & Carl Magnus Bjuggren, 2010. "Effective Corporate Tax Rates and the Size Distribution of Firms," Journal of Industry, Competition and Trade, Springer, vol. 10(3), pages 297-317, September.
  3. Joshua Hall, 2008. "Randall G. Holcombe, Entrepreneurship and economic progress," The Review of Austrian Economics, Springer, vol. 21(2), pages 219-222, September.
  4. Graafland, J.J. & Compen, B., 2012. "Economic Freedom and Life Satisfaction: A Cross Country Analysis," Discussion Paper 2012-038, Tilburg University, Center for Economic Research.
  5. Axel Dreher & Martin Gassebner, 2007. "Greasing the Wheels of Entrepreneurship? The Impact of Regulations and Corruption on Firm Entry," CESifo Working Paper Series 2013, CESifo Group Munich.
  6. Amoros, Jose Ernesto, 2009. "Entrepreneurship and Quality of Institutions," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Concepción Román & Emilio Congregado & José Millán, 2011. "Dependent self-employment as a way to evade employment protection legislation," Small Business Economics, Springer, vol. 37(3), pages 363-392, October.
  8. Pete, Stefan & Nagy, Agnes & Matis, Dumitru & Gyorfy, Lehel Zoltan & Benyovszki, Annamaria & Petru, Tunde Petra, 2011. "Early-stage entrepreneurial aspirations in efficiency-driven economies," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 5-18, June.
  9. Niels Bosma, 2012. "The Global Entrepreneurship Monitor (GEM) and its Impact on Entrepreneurship Research," Global Entrepreneurship Monitor Working Paper Series 1201, Global Entrepreneurship Research Association, revised May 2012.
  10. Kodila-Tedika, Oasis & Agbor Agbor, Julius, 2012. "Does Trust Matter For Entrepreuneurship : Evidence From A Cross-Section Of Countries," MPRA Paper 42292, University Library of Munich, Germany.
  11. Nyström, Kristina, 2008. "The Institutions of Economic Freedom and Entrepreneurship: Evidence from Panel Data," Ratio Working Papers 114, The Ratio Institute.
  12. Cosmin MARINESCU, 2012. "Transaction Costs and Economic Performance: An Institutional Approach," Economia. Seria Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 15(2), pages 371-379, December.
  13. Harris, Jared D. & Sapienza, Harry J. & Bowie, Norman E., 2009. "Ethics and entrepreneurship," Journal of Business Venturing, Elsevier, vol. 24(5), pages 407-418, September.
  14. Bergh, Andreas & Lyttkens, Carl Hampus, 2011. "Measuring institutional quality in ancient Athens," Working Papers 2011:10, Lund University, Department of Economics, revised 18 Oct 2011.
  15. Cosmin Marinescu, 2013. "Institutional Quality of the Business Environment: Some European Practices in a Comparative Analysis," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 15(33), pages 270-287, February.

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