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The Effect Of The Shadow Economy And Economic Freedom On Entrepreneurship: An Empirical Study In Asian Countries

Author

Listed:
  • BUU KIEM DANG

    (Faculty of Finance and Accounting, Saigon University, 273 An Duong Vuong Street, Ward 3, District 5, Ho Chi Minh City, Vietnam)

  • KHOI DINH NGUYEN

    (Entreprenuership Department, FPT University-Can Tho Campus, 600 Nguyen Van Cu Street, An Binh Ward, Ninh Kieu District, Can Tho City, Vietnam)

Abstract

This study examines the effect of the shadow economy, economic freedom and other macroeconomic factors on formal entrepreneurship in Asian countries. The dataset encompasses 28 countries over the period from 1995 to 2018. The Fixed Effect Model (FEM) and Generalized Least Squares (GLS) methodologies are employed for regression analysis. The results indicate a nonlinear relationship between the shadow economy and formal entrepreneurship. Economic freedom, particularly trade freedom, significantly enhances entrepreneurship. Positive macroeconomic influences on formal entrepreneurship include financial development, political stability, GDP per capita growth and foreign direct investment net inflows, while government spending and unemployment negatively affect entrepreneurship. The findings suggest that a substantial shadow economy does not inherently impede formal entrepreneurship. Consequently, governments should prudently consider the role of the shadow economy in fostering entrepreneurial growth. Moreover, policies aimed at improving economic freedom, especially trade freedom, can create a conducive environment for boosting formal entrepreneurship.

Suggested Citation

  • Buu Kiem Dang & Khoi Dinh Nguyen, 2024. "The Effect Of The Shadow Economy And Economic Freedom On Entrepreneurship: An Empirical Study In Asian Countries," Journal of Developmental Entrepreneurship (JDE), World Scientific Publishing Co. Pte. Ltd., vol. 29(03), pages 1-31, September.
    • Handle: RePEc:wsi:jdexxx:v:29:y:2024:i:03:n:s1084946724500171
    DOI: 10.1142/S1084946724500171
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    More about this item

    Keywords

    Shadow economy; economic freedom; entrepreneurship; Asian countries;
    All these keywords.

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • P14 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Property Rights

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