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Title:Greasing the wheels of entrepreneurship? The impact of regulations and corruption on firm entry PDF Logo
Authors:Dreher, Axel
Gassebner, Martin
Issue Date:2007
Series/Report no.:KOF working papers // Konjunkturforschungsstelle, Eidgenössische Technische Hochschule Zürich 166
Abstract:The paper investigates whether the impact of regulations on entrepreneurship depends on corruption. We first test whether regulations robustly deter firm entry into the markets. Our results show that some regulations are indeed important determinants of entrepreneurial activity. Specifically, more procedures required to start a business and larger minimum capital requirements are detrimental to entrepreneurship. Second, we test whether corruption reduces the negative impact of regulations on entrepreneurship in highly regulated economies. Our empirical analysis for a maximum of 43 countries over the period 2003-2005 shows that corruption is beneficial in highly regulated economies. At the maximum level of regulation among our sample of countries, corruption significantly increases entrepreneurial activity. Our results thus provide support for the grease the wheels hypothesis.
Subjects:corruption
start-ups
grease the wheels
entrepreneurship
regulation
doing business
JEL:D73
F59
M13
L26
Persistent Identifier of the first edition:doi:10.3929/ethz-a-005389461
Document Type:Working Paper
Appears in Collections:KOF Working Papers, KOF Konjunkturforschungsstelle, ETH Zürich

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