Creating Businesses in the Least Developed Countries: Does the Regulatory Environment Matter?

Antonio Afonso and M. Carmen Blanco-Arana

No 11838, CESifo Working Paper Series from CESifo

Abstract: This paper assesses the impact of the regulatory environment on the new business creation in 45 Least Developed Countries (LDC) using a panel data from 2000 to 2021. Empirical evidence, derived from a fixed effects (FE) model, indicates a strong relationship between business regulation and new business creation in LDC. This suggests that the regulatory framework of a country is a crucial factor that influences entrepreneurial decisions and can significantly contribute to economic growth. The overall economic situation of a country also has a positive and significant impact. Additionally, factors such as accessibility to financial services, political stability, control of corruption, and economic freedom clearly affect the establishment of new businesses in these countries. Similar results are obtained using the Generalised Method of Moments (GMM) estimator, through the use of a dynamic panel data approach. Finally, business regulation is also strongly associated with new business creation in OECD countries.

Keywords: new business; regulatory environment; FE; GMM; panel data; LDC. (search for similar items in EconPapers)
JEL-codes: C23 G18 M20 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-ent, nep-fdg and nep-reg
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Working Paper: Creating businesses in the Least Developed Countries: does the Regulatory Environment Matter? (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_11838

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