Size Matters: Entrepreneurial Entry and Government

59 Pages Posted: 12 Jul 2010

See all articles by Ruta Aidis

Ruta Aidis

University College London; University of Amsterdam - Faculty of Economics and Business (FEB)

Saul Estrin

Centre for Economic Policy Research (CEPR); London School of Economics & Political Science (LSE); IZA Institute of Labor Economics

Tomasz Mickiewicz

Aston University - Aston Business School

Abstract

We explore the country-specific institutional characteristics likely to influence an individual's decision to become an entrepreneur. We focus on the size of the government, on freedom from corruption, and on 'market freedom' defined as a cluster of variables related to protection of property rights and regulation. We test these relationships by combining country-level institutional indicators for 47 countries with working age population survey data taken from the Global Entrepreneurship Monitor. Our results indicate that entrepreneurial entry is inversely related to the size of the government, and more weakly to the extent of corruption. A cluster of institutional indicators representing 'market freedom' is only significant in some specifications. Freedom from corruption is significantly related to entrepreneurial entry, especially when the richest countries are removed from the sample but unlike the size of government, the results on corruption are not confirmed by country-level fixed effects models.

Keywords: entrepreneurship, government, market freedom, corruption

JEL Classification: L26, P14, P51, P37

Suggested Citation

Aidis, Ruta and Estrin, Saul and Estrin, Saul and Mickiewicz, Tomasz Marek, Size Matters: Entrepreneurial Entry and Government. IZA Discussion Paper No. 5052, Available at SSRN: https://ssrn.com/abstract=1638508 or http://dx.doi.org/10.2139/ssrn.1638508

Ruta Aidis (Contact Author)

University College London ( email )

Gower Street
London
United Kingdom

University of Amsterdam - Faculty of Economics and Business (FEB) ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands
+ 31 20 525 4011 (Phone)
+ 31 20 525 4254 (Fax)

Saul Estrin

Centre for Economic Policy Research (CEPR)

London
United Kingdom

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Tomasz Marek Mickiewicz

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

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