Where Does Regulation Hurt? Evidence from New Businesses Across Countries

49 Pages Posted: 21 Feb 2009  

Silvia Ardagna

National Bureau of Economic Research (NBER); Goldman Sachs - London

Annamaria Lusardi

George Washington University - Department of Accountancy; National Bureau of Economic Research (NBER)

Date Written: February 2009

Abstract

We use two micro data sets that collect harmonized data across countries to investigate the effects of regulation on new businesses. We are able to distinguish between two types of entrepreneurs: those who start a business to pursue a business opportunity and those who start a business because they could not find better work. Irrespective of the measure of regulation we use, we always find a detrimental effect of regulation on entrepreneurship. While women are overall less likely to start new businesses, in more regulated countries women are pulled into entrepreneurship not to pursue a business opportunity but because they could not find better work. Moreover, regulation dampens the effects of self-assessed business skills and social networks. In more regulated economies, those with better business skills and those who know other entrepreneurs are less likely to become entrepreneurs to pursue a business opportunity. Tighter regulation also exacerbates fear of failure, further discouraging business start-up. All our estimates point to a negative effect of regulation.

Suggested Citation

Ardagna, Silvia and Lusardi, Annamaria, Where Does Regulation Hurt? Evidence from New Businesses Across Countries (February 2009). NBER Working Paper No. w14747. Available at SSRN: https://ssrn.com/abstract=1347269

Silvia Ardagna (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Goldman Sachs - London ( email )

130 Peterborough Court
133 Fleet Street
London, EC4A 2BB
United Kingdom

Annamaria Lusardi

George Washington University - Department of Accountancy ( email )

George Washington University School of Business
Washington, DC 20052
United States

HOME PAGE: http://business.gwu.edu/profiles/annamaria-lusardi/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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