Entrepreneurial Action, Public Policy, and Economic Outcomes

Entrepreneurial Action, Public Policy, and Economic Outcomes

New Thinking in Political Economy series

Edited by Robert F. Salvino Jr., Michael T. Tasto and Gregory M. Randolph

Examining the economics of entrepreneurship from the perspectives of productive versus unproductive entrepreneurial behavior and the role of institutions in economic outcomes, the authors in this book seek to advance the research on institutions by providing a simple framework to analyze the broader, long-term consequences of economic policies. They examine the relationship between economic freedom and economic outcomes and summarize empirical evidence and theory. The book also provides practical policy solutions that are based on the authors' cogent analyses.

Chapter 4: Measures of entrepreneurship and institutions: a more formal robustness check

Noel D. Campbell, David T. Mitchell and Tammy M. Rogers

Subjects: business and management, entrepreneurship, economics and finance, austrian economics, politics and public policy, public policy


Our purpose was to provide a robustness check of the relationship between entrepreneurial activity and economic freedom. As a deliberate "robustness check," we estimated various U.S. state-based measures of entrepreneurship found in the research literature, using the same estimator, all within a consistent model that included political institutions, for which the Economic Freedom of North America index was the proxy. Our base model was derived from Reynolds, Storey, and Westhead (1994). We failed to replicate many of the results found in the literature. The various measures of entrepreneurship were related to different independent variables. Economic freedom was not a consistently significant predictor of entrepreneurial activity. Although pro-market institutions are undoubtedly a significant driver of entrepreneurial activity, we conclude that researchers must carefully specify what they mean by "entrepreneurship" and "institutions," and, generally, perform more robustness testing. REFERENCE Reynolds, P., D. Storey, and P. Westhead (1994), "Cross-national comparisons of the variation in new firm formation rates", Regional Studies, 28 (4), 443-456.

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