Creating a Policy Environment for Entrepreneurs

FRB of St. Louis Working Paper No. 2005-064B

34 Pages Posted: 8 Nov 2005

See all articles by Thomas A. Garrett

Thomas A. Garrett

Federal Reserve Bank of St. Louis - Research Division

Howard J. Wall

Lindenwood University - Center for Economics and the Environment

Date Written: March 2006

Abstract

This paper demonstrates that levels of entrepreneurship can be greatly affected by the general policy environment. Using a state-level panel, we estimate the effects of several policy variables on rates of entrepreneurship and find that bankruptcy exemptions, corporate tax rates, and the level of the minimum wage all affect a state's rate of entrepreneurship. For the median state, these policies reduced the level of entrepreneurship by 10.5 percent. Much of the geographic pattern of entrepreneurship can be explained by policy differences: The low-entrepreneurship states of the Great Lakes and the South tend to have relatively unfriendly policy environments, and the high-entrepreneurship states of the West tend to have relatively friendly policies. On the other hand, although New England states tend to have relatively unfriendly policy environments, they also tend to have high rates of entrepreneurship.

Keywords: entrepreneurship, government policy

JEL Classification: J23, R12

Suggested Citation

Garrett, Thomas A. and Wall, Howard J., Creating a Policy Environment for Entrepreneurs (March 2006). FRB of St. Louis Working Paper No. 2005-064B, Available at SSRN: https://ssrn.com/abstract=840148 or http://dx.doi.org/10.2139/ssrn.840148

Thomas A. Garrett (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
Saint Louis, MO 63011
United States

Howard J. Wall

Lindenwood University - Center for Economics and the Environment ( email )

209 S. Kingshighway
St. Charles, MO 63301
United States

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