The Effect of Business Regulations on Nascent and Young Business Entrepreneurship

Abstract

We examine the relationship, across 39 countries, between regulation and entrepreneurship using a new two-equation model. We find the minimum capital requirement required to start a business lowers entrepreneurship rates across countries, as do labour market regulations. However the administrative considerations of starting a business – such as the time, the cost, or the number of procedures required – are unrelated to the formation rate of either nascent or young businesses. Given the explicit link made by Djankov et al. [Djankov et al. 2002, ‹The Regulation of Entry’, Quarterly Journal of Economics 117(1), 1–37] between the speed and ease with which businesses may be established in a country and its economic performance – and the enthusiasm with which this link has been grasped by European Union policy makers – our findings imply this link needs reconsidering.

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Acknowledgement

We are grateful to Zoltan Acs, Sander Wennekers and two anonymous referees for their comments on earlier drafts of the paper. The paper has been written in the framework of the research program SCALES carried out by EIM and financed by the Dutch Ministry of Economic Affairs.

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Correspondence to André van Stel.

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Prepared for: Small Business Economics (2007), Special issue GEM conference 2005

Appendix A: Estimation sample

Appendix A: Estimation sample

Table A.1 lists the distribution of observations in our estimation sample over the countries. A country can have 4 observations maximum (for the years 2002–2005). It is also indicated whether the country is ranked as a poor country. In total we have 112 observations 26 of which are of poor countries.

Table A.1 Estimation sample

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van Stel, A., Storey, D.J. & Thurik, A.R. The Effect of Business Regulations on Nascent and Young Business Entrepreneurship. Small Bus Econ 28, 171–186 (2007). https://doi.org/10.1007/s11187-006-9014-1

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Key words

  • Global Entrepreneurship Monitor
  • nascent entrepreneurship
  • regulation
  • World Bank Doing Business
  • young businesses

JEL classifications

  • K20
  • L26
  • L51
  • M13
  • O57