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Entrepreneurship and State Public Policy

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  • Steven F. Kreft

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

  • Elham Mafi-Kreft

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

Many state and local governments have focused on enacting policies to promote entrepreneurship in an effort to enhance economic growth. This paper will test the relationship between entrepreneurial activity and state economic freedom in a Granger causality framework. We build a panel data set of freedom scores and entrepreneurial activity measures within the fifty US states from 1981 to 2003, and our results show that, as a whole, economic freedom causes entrepreneurship. However, we find evidence that once entrepreneurs are in place, they increase the size of government spending, which is contradictory to economic freedom.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2007-03-kreft-mafi.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2007-03.

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Date of creation: Jan 2007
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Handle: RePEc:iuk:wpaper:2007-03

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Keywords: entrepreneurship; public Policy; economic freedom;

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  1. Douglas Holtz-Eakin & David Joulfaian & Harvey S. Rosen, 1993. "Sticking it Out: Entrepreneurial Survival and Liquidity Constraints," NBER Working Papers 4494, National Bureau of Economic Research, Inc.
  2. Magnus Blomstrom & Robert E. Lipsey & Mario Zejan, 1993. "Is Fixed Investment the Key to Economic Growth?," NBER Working Papers 4436, National Bureau of Economic Research, Inc.
  3. Blanchflower, David G & Oswald, Andrew J, 1998. "What Makes an Entrepreneur?," Journal of Labor Economics, University of Chicago Press, vol. 16(1), pages 26-60, January.
  4. repec:cto:journl:v:18:y:1998:i:2:p: is not listed on IDEAS
  5. W. Kenn Farr & Richard A. Lord & J. Larry Wolfenbarger, 1998. "Economic Freedom, Political Freedom, and Economic Well-Being: A Causality Analysis," Cato Journal, Cato Journal, Cato Institute, vol. 18(2), pages 247-262, Fall.
  6. Bruce, Donald, 2000. "Effects of the United States tax system on transitions into self-employment," Labour Economics, Elsevier, vol. 7(5), pages 545-574, September.
  7. Donald Bruce & Mohammed Mohsin, 2006. "Tax Policy and Entrepreneurship: New Time Series Evidence," Small Business Economics, Springer, vol. 26(5), pages 409-425, 06.
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