Studies on Entrepreneurship, Regulation and Economic Freedom

This dissertation is a collection of empirical essays studying the effects of institutional qualities on firm dynamics and latent entrepreneurship. After providing an overview of the dissertation in Chapter 1, in Chapter 2 I analyze the effect of industry level federal regulations on firm decisions to exit the market. The idea is to test whether stricter regulation results in reduced competitiveness for smaller firms relative to larger firms. Using data from the Kauffman Firm Survey and RegData, I find that the effect of regulation on firm exit varies based on firm size. My findings are in congruence with the predictions of regulator models where regulation acts as a fixed cost on all firms, leading to a reduction in small firms relative to large firms.;In Chapter 3, I look at the effect of economic freedom on entrepreneurial intention. While a number of studies have looked at the effect of economic freedom on entrepreneurship, none have looked at how economic freedom influences the intention to engage in entrepreneurship. Using panel data on a wide variety of countries, I investigate the effects of economic freedom, especially regulation, on entrepreneurial intention. My findings suggest that stricter credit market regulation reduces entrepreneurial intention whereas more stringent labor regulations restricts job availability and thereby encourages more people to take up entrepreneurship as a career choice.;Chapter 4 is an addition to the literature on economic freedom and economic growth. It has been well-established that economic freedom is associated with good economic outcomes. Economic freedom, however, is comprised of numerous dimensions. The marginal benefit to improving policy in one area can be expected to depend on the amount of freedom in the other dimensions. Thus, which policy improvement is most impactful depends on the entire menu of current policies and, therefore, differ between states. In Chapter 4, Bryan McCannon and I explore how economic freedom measurements can be used to guide policy. We propose a method for creating a growth-enhancing economic freedom index, which allows for nonlinearities and interaction effects between the components to economic freedom. We use this method to illustrate that U.S. states differ in which policy area generates the greatest gains. To validate our method, we apply our index to state bond markets. If our measurement is useful, then it should correlate with bond ratings. Consistent with this hypothesis, we find that state bond ratings are strongly correlated with our growth-enhancing economic freedom index