The Wealth of Regions: Government Quality and Entrepreneurship in Europe

University of Gothenburg, The Quality of Government Institute Working Paper Series 2012:12

42 Pages Posted: 10 Nov 2012

See all articles by Nicholas Charron

Nicholas Charron

University of Gothenburg

Victor Lapuente

University of Gothenburg - Department of Political Science

Marina Nistotskaya

University of Gothenburg - Department of Political Science

Date Written: October 2012

Abstract

This paper argues that government quality – operationalized as the ability of government to treat all their citizens in an impartial way – levels the ‘playing field’ for economic agents with and without connections to politicians and administrators in government, therefore encouraging entrepreneurial minded individuals to start or develop their business. Based on a unique data set on the quality of government in 172 regions of 18 European countries, the paper shows that regions with more impartial governments have significantly more small and medium-sized firms. It is also shown that quality of government is a determinant of the spatial distribution of entrepreneurship within countries. Under partial governments entrepreneurs face incentives to create and maintain special relations with power holders and therefore to be closer to the source of privileges and locate their activities around the national capitals, where the most relevant political connections rest.

Keywords: quality of government, enterpreneurship, European regions

JEL Classification: M13, O12, O18, O52, R12

Suggested Citation

Charron, Nicholas and Lapuente, Victor and Nistotskaya, Marina, The Wealth of Regions: Government Quality and Entrepreneurship in Europe (October 2012). University of Gothenburg, The Quality of Government Institute Working Paper Series 2012:12, Available at SSRN: https://ssrn.com/abstract=2173256 or http://dx.doi.org/10.2139/ssrn.2173256

Nicholas Charron (Contact Author)

University of Gothenburg ( email )

Göteborg, Sweden
Sweden

Victor Lapuente

University of Gothenburg - Department of Political Science ( email )

Box 711
Göteborg, S-405 30
Sweden

Marina Nistotskaya

University of Gothenburg - Department of Political Science ( email )

Box 711
Göteborg, S-405 30
Sweden

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