Policy making and regulation to promote entrepreneurship

: procedural vs. monetary policies

Abstract

The main objective of this paper is to understand under what circumstances a government should focus on procedural or monetary policies to foster entrepreneurial entry. To do this, we measure entrepreneurship by the entry density of new companies, which counts formally registered entrepreneurs only. However, we also control the effect on opportunity and necessity-driven entrepreneurship rates, which include entrepreneurs of all stages and sectors. Procedural and monetary policies are represented by time and cost to start a business respectively. The variety of control variables used in literature is approached by aggregating explanatory variables from 16 studies, resulting in 44 variables of which 8 are used in the regression analysis. For the empirical analysis, we use country and year fixed effects with country-clustered standard errors. We find a stronger positive impact for lowering cost to start a business, especially in countries with high rates of necessity-driven entrepreneurs or countries which did not belong to the lowest third in cost or time to start a business. However, the findings also suggest, that these policies do not incentivize non-entrepreneurs to engage in entrepreneurship, but rather attract informally operating entrepreneurs to register their business.

Date of Award	25 Jul 2017
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Cláudia Isabel de Sousa Costa (Supervisor)