The Direct Effect of Corporate Law on Entrepreneurship

Jorge Guzman

The Journal of Law, Economics, and Organization, 2025, vol. 41, issue 1, 66-90

Abstract: From 1946 to 1983, US states modernized their corporate law by adopting the Model Business Corporation Act (MBCA), a compendium of legal best practices. Better corporate law increased entrepreneurship. After the adoption of the MBCA, the number of new local corporations increased by 26% on average, half of which was substitution from other firm types, and the rest was net-new firms. States that only partially adopted saw no benefit, and the largest increases were concentrated in regions with ex ante lower quality law. At the individual level, people in states adopting the MBCA also report higher self-employment levels, but not higher wage employment or labor force participation. Consistent with the MBCA increasing efficiency and decreasing regulatory capture, the effect was larger for women, black, and those located outside the central city.

Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1093/jleo/ewad024 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:jleorg:v:41:y:2025:i:1:p:66-90.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Journal of Law, Economics, and Organization is currently edited by Andrea Prat

More articles in The Journal of Law, Economics, and Organization from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().