Does decentralization affect local entrepreneurial capacity?

Marc Garcia-Ruiz ()
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Marc Garcia-Ruiz: Faculty of Economics and Business, Universitat de Barcelona, Spain.

No 202413, IREA Working Papers from University of Barcelona, Research Institute of Applied Economics

Abstract: In recent decades, decentralization has become a prominent topic in both academic and political discussions, with research increasingly focusing on its implications for economic development. This paper explores a specific facet of this debate by examining how decentralization influences business creation and the survival of new enterprises at the local level. By leveraging a panel dataset covering regions across multiple countries, we assess whether decentralization promotes entrepreneurship and sustains new businesses, particularly through the mediating role of institutional quality. Our findings suggest that while decentralization encourages business creation, it may reduce short-term firm survival rates. Additionally, strong institutional quality seems to amplify decentralization's positive effect on entrepreneurship and mitigate its adverse impact on the survival rate.

Keywords: Local Economies; Decentralization; Entrepreneurship. JEL classification: L26, O43, O52, R11. (search for similar items in EconPapers)
Pages: 42 pages
Date: 2024-02, Revised 2024-02
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Persistent link: https://EconPapers.repec.org/RePEc:ira:wpaper:202413

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