Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 225: Business regulation and red tape in the entrepreneurial economy

Kristina Nyström ()
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Kristina Nyström: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: This paper discusses the interrelationship between business regulations and entrepreneurial activities. Most empirical studies find that business regulations have a negative effect on the amount of entrepreneurial activities in an economy. In addition, we argue that the regulatory quality and amount of business regulation may also be influenced by the amount of entrepreneurial activities in the society since policymakers and bureaucrats tend to respond to changing conditions in the society. In the empirical part of the paper, data for 23 OECD countries for the period 1972-2002 in order to elaborate on the interrelationship between entrepreneurship and the quality of business regulations. The empirical findings indicate that there is a positive relationship between entrepreneurship, and the quality of business regulations.

Keywords: entrepreneurship; red tape; business regulation

JEL-codes: L51

27 pages, April 10, 2010

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