In this paper we examine the relationship, across 39 countries, between regulation and entrepreneurship using a new two-equation model. We find the minimum capital requirement required to start a business lowers entrepreneurship rates across countries, as do labour market regulations. However the administrative considerations of starting a business - such as the time, the cost, or the number of procedures required - are unrelated to the formation rate of either nascent or young businesses. Given the explicit link made by Djankov et al. (2002) between the speed and ease with which businesses may be established in a country and its economic performance - and the enthusiasm with which this link has been grasped by European Union policy makers - our findings imply this link needs reconsidering.
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Paper provided by EIM Business and Policy Research in its series Scales Research Reports with number
H200609.
Stel, A.J. van & Storey, D. & Thurik, A.R., 2006.
"The Effect of Business Regulations on Nascent and Young Business Entrepreneurship,"
Research Paper
ERS-2006-052-ORG Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni.
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