The National Bureau of Economic Research published an interesting paper by Silvia Ardagna (Harvard) and Annamaria Lusardi (Dartmouth) on the effects of regulation on new businesses.
In “Where does regulation hurt? Evidence from new businesses across countries,” the authors concluded,
The estimates reported above illustrate that regulation is a major deterrent to entrepreneurship. Not only does tighter regulation dampen the effects of important predictors of entrepreneurship, such as social networks and business skills, but it also curbs opportunity entrepreneurship, which is the type of entrepreneurship that matters the most in terms of employment and growth. While several authors have proposed policies to encourage entrepreneurship that focus mostly on relaxing liquidity constraints, in this paper we highlight another way in which countries can foster entrepreneurship: relax regulation. According to our estimates, adopting the policies of low-regulation countries can substantially spur the birth of new businesses. Easing of regulation will allow individuals who have business skills to try out new ventures and will exploit the synergies offered by interactions with other entrepreneurs. Moreover, entrepreneurs will be pulled into the type of entrepreneurship that can be more beneficial for both the macro economy and individual well-being.
