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Economic Behavior, Economic Freedom, and Entrepreneurship

Economic Behavior, Economic Freedom, and Entrepreneurship

Edited by Richard J. Cebula, Joshua Hall, Franklin G. Mixon Jr and James E. Payne

Expert editors add to an important field of research, the economics of entrepreneurship, and explore how institutions influence entrepreneurial behavior. This book provides comprehensive and contemporary insights into the interaction between economic behavior of firms and households, economic freedom, and entrepreneurship, and how it generates an environment with greater opportunities for growth and development for individuals, households, and private-sector firms.

Chapter 17: On the relationship between economic freedom and entrepreneurship

R. W. Hafer

Subjects: economics and finance, austrian economics, economics of entrepreneurship, political economy


We utilize two measures of entrepreneurial activity not often used in previous research to investigate the relationship between economic freedom and entrepreneurship. One is the Global Entrepreneurship and Development Index. The second is the number of newly formed corporations in a country from the World Bank. We use the Fraser Institute’s Economic Freedom of the World index to gauge country-level economic freedom. The empirical evidence presented here indicates that differences in economic freedom, based on the Economic Freedom of the World index, are statistically and economically important in explaining observed differences in entrepreneurial activity across countries. This conclusion holds whether entrepreneurship is the Global Entrepreneurship and Development Index (GEDI) or the World Bank’s series on new firm incorporations. The evidence indicates that countries with higher levels of economic freedom, other influences held constant, on average have higher levels of entrepreneurial activity.

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