Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 114: The Institutions of Economic Freedom and Entrepreneurship: Evidence from Panel Data

Kristina Nyström ()
Additional contact information
Kristina Nyström: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: This paper provides new evidence on the determinants of entrepreneurship across countries. The paper investigates the relationship between the institutional setting, in terms of economic freedom, and entrepreneurship, as measured by self-employment in a panel data setting covering 23 OECD countries and the time-period 1972-2002. The measure of economic freedom includes five aspects: size of government, legal structure and security of property rights, access to sound money, freedom to trade internationally, and the regulation of credit, labour and business. The empirical findings show that a smaller government sector, better legal structure and security of property rights and less regulation of credit, labour and business tend to increase entrepreneurship.

Keywords: entrepreneurship; self-employment; institutions; economic freedom

JEL-codes: M13; O50

28 pages, January 3, 2008

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