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The impact of regulatory quality on business venturing: A semi-parametric approach

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  • Polemis, Michael L.
  • Stengos, Thanasis

Abstract

We study the effects of regulatory quality on entrepreneurial activity in 30 OECD countries through the lens of a partially linear panel data model. We argue that there is a nonmonotonic “inverted-U shaped” curve between regulatory quality and total early-stage entrepreneurship activity lending support to the theory of pubic choice. Moreover, the empirical findings postulate that a deterioration in the effectiveness and enforcement of government regulations (i.e., government inability to formulate and implement sound policies, onerous regulation, etc.) harm setting up a business activity within the OECD countries. Our findings survive robustness checks under different dimensions of entrepreneurship (nascent, new and established entrepreneurs) and endogeneity bias. Lastly, these results have important implications for policy makers and government officials in promoting effective regulatory measures to enhance entrepreneurial activity.

Suggested Citation

  • Polemis, Michael L. & Stengos, Thanasis, 2020. "The impact of regulatory quality on business venturing: A semi-parametric approach," Economic Analysis and Policy, Elsevier, vol. 67(C), pages 29-36.
    • Handle: RePEc:eee:ecanpo:v:67:y:2020:i:c:p:29-36
    DOI: 10.1016/j.eap.2020.05.005
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    More about this item

    Keywords

    Entrepreneurship; Regulation; Nonlinearities; Institutions; OECD;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact

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