Greasing the Wheels of Entrepreneurship? The Impact of Regulations and Corruption on Firm Entry

Axel Dreher and Martin Gassebner

No 2013, CESifo Working Paper Series from CESifo

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.

Keywords: corruption; start-ups; grease the wheels; entrepreneurship; regulation; doing business (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Working Paper: Greasing the Wheels of Entrepreneurship? The Impact of Regulations and Corruption on Firm Entry (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_2013

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