The effect of rising public debt on entrepreneurship

Jonathan Munemo ()
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Jonathan Munemo: Salisbury University

Economics Bulletin, 2026, vol. 46, issue 3, 1082 - 1093

Abstract: This paper examines the relationship between public debt and entrepreneurship, measured by new business creation. The analysis is conducted on a large panel of 141 countries over the period 2006–2018 using instrumental variable and system GMM estimation techniques to address endogeneity concerns. Preliminary findings indicate a non-linear (inverted U-shaped) relationship between public debt and entrepreneurial activity, implying that while moderate levels of public debt may be associated with increased new firm creation, higher debt levels significantly weaken entrepreneurship. These findings highlight the importance of maintaining sustainable debt levels to foster a conducive environment for business formation.

Keywords: public debt; entrepreneurship; fiscal policy (search for similar items in EconPapers)
JEL-codes: H6 L2 (search for similar items in EconPapers)
Date: 2026-09-30
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