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Economic freedom and entrepreneurial activity: Some cross-country evidence

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Abstract

While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use the Economic Freedom Index from the Fraser Institute to ask which elements of economic policy making and the institutional framework are conducive to the supply of entrepreneurship, measured by data on entrepreneurship from the Global Entrepreneurship Monitor. We find that the size of government is negatively correlated and sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship.

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Authors and Affiliations

  1. Department of Economics, Aarhus School of Business, University of Aarhus, Prismet, Silkeborgvej 2, 8000, Aarhus C, Denmark

    Christian Bjørnskov

  2. Center for Strategic Management and Globalization, Copenhagen Business School, Porcelainshaven 24, 2000, Frederiksberg, Denmark

    Nicolai J. Foss

  3. Department of Strategy and Management, Norwegian School of Economics and Business Administration, Breiviksveien 40, 5045, Bergen, Norway

    Nicolai J. Foss

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  1. Christian Bjørnskov
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  2. Nicolai J. Foss
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Correspondence to Christian Bjørnskov.

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Bjørnskov, C., Foss, N.J. Economic freedom and entrepreneurial activity: Some cross-country evidence. Public Choice 134, 307–328 (2008). https://doi.org/10.1007/s11127-007-9229-y

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