This study looks at the effect of institutional quality on new business activity and organized crime. Building on the work of Baumol on productive versus unproductive entrepreneurship, I consider criminal activity as a form of unproductive entrepreneurship. The empirical analysis utilizes unbalanced international panel data of up to 75 countries between 2002 and 2012. The empirical results suggest a positive relationship between institutional quality and new business formation and a negative relationship between institutional quality and criminal activity and rent seeking. I conclude the chapter by discussing the complexity of the relationship between different forms of entrepreneurship that must be considered in future studies investigating this issue.
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