Entrepreneurial Action, Public Policy, and Economic Outcomes
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Entrepreneurial Action, Public Policy, and Economic Outcomes

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

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

Extract

After years of empirical research several “stylized facts” (Kaldor, 1961) have emerged from the entrepreneurship research literature. Entrepreneurship is a vital ingredient of economic development, both internationally and intra-nationally. The type and amount of entrepreneurial activity depends on a society’s “institutions” – the legal, political, and social rules of the game. The “rules” of a classical liberal society promote pro-development entrepreneurship more than the “rules” of other types of social organization (Sobel, 2008). In order to measure the degree to which a society conforms to the classical liberal ideal, a literature has developed around the so-called economic freedom indices (Gwartney and Lawson, 2003; Karabegovic et al., 2003). However, the literature uses different measures of entrepreneurship, different measures of institutions, different models, and different estimators. On the one hand, these “facts” are a robustness check. Unless there was something “real” to these facts, it seems very unlikely to have such similar findings across such dissimilar empirical approaches. This is one type of robustness check, which we’ll refer to as “informal robustness check.” There are more formal types of robustness checks, too. One would be to conduct meta-analysis on the relationship between institutions and entrepreneurial activity, such as Doucouliagos and Ulubasoglu (2006) performed on the more general contention that more economic freedom increases a society’s wealth. Unfortunately, although there are numerous studies relating economic freedom to entrepreneurial activity, there are not enough studies to conduct a meta-analysis.

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