Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence

38 Pages Posted: 26 Apr 2007

See all articles by Christian Bjørnskov

Christian Bjørnskov

Aarhus University - Department of Economics and Business; Research Institute of Industrial Economics (IFN); Center for Political Studies; Institute for Corruption Studies

Nicolai J. Foss

Bocconi University - Department of Management and Technology

Date Written: September 2006

Abstract

While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use the measures of economic freedom to ask which elements of economic policy making and the institutional framework that are responsible for the supply of entrepreneurship (our data on entrepreneurship are derived from the Global Entrepreneurship Monitor). The combination of these two datasets is unique in the literature. We find that the size of government is negatively correlated with entrepreneurial activity but that sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.

Keywords: Economic freedom, entrepreneurship, cross-country variation

JEL Classification: M13, O31, O50

Suggested Citation

Bjørnskov, Christian and Foss, Nicolai J., Economic Freedom and Entrepreneurial Activity: Some Cross-Country Evidence (September 2006). Available at SSRN: https://ssrn.com/abstract=982128 or http://dx.doi.org/10.2139/ssrn.982128

Christian Bjørnskov

Aarhus University - Department of Economics and Business ( email )

Fuglesangs Allé 4
Aarhus V, DK-8210
Denmark

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Center for Political Studies

Landgreven 3
Copenhagen K, DK-1301
Denmark

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

Nicolai J. Foss (Contact Author)

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

Register to save articles to
your library

Register

Paper statistics

Downloads
441
Abstract Views
3,766
rank
66,204
PlumX Metrics