Edited by Richard J. Cebula, Joshua Hall, Franklin G. Mixon Jr and James E. Payne
Chapter 17: On the relationship between economic freedom and entrepreneurship
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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