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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.

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    Bibliographic Info

    Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15510.

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    Date of creation: Nov 2009
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    Publication status: published as "Heterogeneity in the Effect of Regulation on Ent repreneurship and Entry Size , " with Si lvia Ardagna, Journal of the European Economic Ass ociation Papers and Proceedings , 2010 .
    Handle: RePEc:nbr:nberwo:15510

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    1. Silvia Ardagna & Annamaria Lusardi, 2009. "Where does regulation hurt? Evidence from new businesses across countries," NBER Working Papers 14747, National Bureau of Economic Research, Inc.
    2. William Kerr & Ramana Nanda, 2006. "Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship," Harvard Business School Working Papers, Harvard Business School 07-033, Harvard Business School, revised Oct 2008.
    3. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2009. "Corporate Taxation and the Size of New Firms: Evidence From Europe," Discussion Paper, Tilburg University, Center for Economic Research 2009-72, Tilburg University, Center for Economic Research.
    4. Silvia Ardagna & Annamaria Lusardi, 2008. "Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints," NBER Working Papers 14012, National Bureau of Economic Research, Inc.
    5. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, Elsevier, vol. 82(3), pages 591-629, December.
    6. Ciccone, Antonio & Papaioannou, Elias, 2007. "Red tape and delayed entry," Working Paper Series, European Central Bank 0758, European Central Bank.
    7. King, Robert G & Levine, Ross, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 108(3), pages 717-37, August.
    8. Da Rin, M. & Di Giacomo, M. & Sembenelli, A., 2010. "Entrepreneurship, Firm Entry, and the Taxation of Corporate Income: Evidence from Europe," Discussion Paper, Tilburg University, Tilburg Law and Economic Center 2010-026, Tilburg University, Tilburg Law and Economic Center.
    9. Edward L. Glaeser & William R. Kerr, 2009. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Journal of Economics & Management Strategy, Wiley Blackwell, Wiley Blackwell, vol. 18(3), pages 623-663, 09.
    10. Josh Lerner & Antoinette Schoar, 2010. "International Differences in Entrepreneurship," NBER Books, National Bureau of Economic Research, Inc, number lern08-2, July.
    11. William R. Kerr & Ramana Nanda, 2009. "Banking Deregulations, Financing Constraints and Firm Entry Size," Harvard Business School Working Papers, Harvard Business School 10-010, Harvard Business School, revised Oct 2009.
    12. Minniti, Maria, 2005. "Entrepreneurship and network externalities," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 57(1), pages 1-27, May.
    13. Mihir Desai & Paul Gompers & Josh Lerner, 2003. "Institutions, Capital Constraints and Entrepreneurial Firm Dynamics: Evidence from Europe," NBER Working Papers 10165, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Pontus Braunerhjelm & Johan E. Eklund, 2014. "Taxes, tax administrative burdens and new firm formation," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 67(1), pages 1-11, 02.
    2. Braunerhjelm, Pontus, 2010. "Entrepreneurship, Innovation and Economic Growth - past experience, current knowledge and policy implications," Working Paper Series in Economics and Institutions of Innovation, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies 224, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

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