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Entrepreneurial response to interstate regulatory competition: evidence from a behavioral discrete choice experiment

Author

Listed:
  • Trey Malone

    () (Michigan State University)

  • Antonios M. Koumpias

    (University of Michigan-Dearborn)

  • Per L. Bylund

    (Oklahoma State University)

Abstract

Despite a developing literature exploring the relationship between regulation, taxation and business startups, few studies have utilized artefactual experimental methods to link the choices made by entrepreneurs to an underlying regulatory framework or tax system. Using information collected from a discrete choice experiment where 182 small business owners and entrepreneurs made eight start-up decisions, we describe the effect of state-level government intervention in terms of an entrepreneur’s choice to start a business. The design allows the generation of data on entrepreneurial choice of institutional setting for new business formation, which are difficult or impossible to observe in natural settings from surveys. We find that over 80% of entrepreneurs are likely to respond adversely to regulatory and tax legislation such as mandatory licensing, income taxes, and time to register a business. Results confirm that, at least in the short run, highly regulated business environments are less likely to foster entrepreneurial market entry. Additionally, a non-trivial fraction of entrepreneurs will choose not to start a new business, even in the presence of low taxation and regulatory burden.

Suggested Citation

  • Trey Malone & Antonios M. Koumpias & Per L. Bylund, 2019. "Entrepreneurial response to interstate regulatory competition: evidence from a behavioral discrete choice experiment," Journal of Regulatory Economics, Springer, vol. 55(2), pages 172-192, April.
  • Handle: RePEc:kap:regeco:v:55:y:2019:i:2:d:10.1007_s11149-019-09375-y
    DOI: 10.1007/s11149-019-09375-y
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    Cited by:

    1. Staples, Malone & Chambers, Dustin & Malone, Trey, 2020. "The economic geography of beer regulations," Center for Growth and Opportunity at Utah State University 307180, Center for Growth and Opportunity.
    2. Polasik, Michał & Huterska, Agnieszka & Iftikhar, Rehan & Mikula, Štěpán, 2020. "The impact of Payment Services Directive 2 on the PayTech sector development in Europe," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 385-401.
    3. Wittberg, Emanuel & Erlingsson, Gissur, 2020. "Do Corrupt Local Governments Inhibit Entrepreneurship? A Contextual Analysis of Start-Ups in Swedish Municipalities," Working Paper Series 1323, Research Institute of Industrial Economics.

    More about this item

    Keywords

    Entrepreneurship; Experiments; Taxes; Occupational licensing; Business registration; Regulatory burden;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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