Size Matters: Entrepreneurial Entry and Government

We explore the country-specific institutional characteristics likely to influence an individual’sdecision to become an entrepreneur. We focus on the size of the government, on freedomfrom corruption, and on ‘market freedom’ defined as a cluster of variables related toprotection of property rights and regulation. We test these relationships by combiningcountry-level institutional indicators for 47 countries with working age population survey datataken from the Global Entrepreneurship Monitor. Our results indicate that entrepreneurialentry is inversely related to the size of the government, and more weakly to the extent ofcorruption. A cluster of institutional indicators representing ‘market freedom’ is only significantin some specifications. Freedom from corruption is significantly related to entrepreneurialentry, especially when the richest countries are removed from the sample but unlike the sizeof government, the results on corruption are not confirmed by country-level fixed effectsmodels....