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The responsiveness of entrepreneurs to working time regulations

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Abstract

In this article, we analyse the impact of enforcement practices (proxied by judicial formalism) and the regulation of working time on entrepreneurial activity by opportunity. We find that higher enforcement formalism mitigates the negative impact exerted by rigid working time regulations on the number of entrepreneurs. While it is agreed that regulatory rigidities may increase labour transaction costs, we show that entrepreneurs are less sensitive to labour regulations the higher the level of enforcement formalism in which they operate. Higher formalism is associated with lower enforcing efficiency and lower probability of being punished for transgressing laws. A policy implication is that encouraging labour flexibility might not improve conditions for entrepreneurial activity in procedurally formalist countries. This is due to the fact that, in those countries, flexibility de facto characterises employment relations, no matter what the law says.

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Acknowledgements

The authors appreciate helpful comments from David Storey. David Urbano has received financial resources from SEJ2007-60995 (Spanish Ministry of Education and Science) and 2005SGR00858 Catalan Government’s Department for Universities, Research and Information Society), and Stefan van Hemmen from SEJ2004-07530-C04-02/SEJ2007-67895-C04-02 (Spanish Ministry of Education and Science) and 2005SGR00813 (Catalan Government’s Department for Universities, Research and Information Society).

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Authors and Affiliations

  1. University of Manchester – School of Law, Oxford Road, Manchester, M13 9PL, UK

    Frank Stephen

  2. Business Economics, Autonomous University of Barcelona, Bellaterra, Barcelona, 08193, Spain

    David Urbano & Stefan van Hemmen

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  1. Frank Stephen
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  2. David Urbano
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  3. Stefan van Hemmen
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Correspondence to David Urbano.

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Stephen, F., Urbano, D. & van Hemmen, S. The responsiveness of entrepreneurs to working time regulations. Small Bus Econ 32, 259–276 (2009). https://doi.org/10.1007/s11187-007-9096-4

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