Entrepreneurship and the Allocation of Government Spending Under Imperfect Markets
Previous studies have established a negative relationship between total government spending and entrepreneurship activity. However, the relationship between the composition of government spending and entrepreneurial activity has been woefully under...
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| Format: | Publications & Research |
| Language: | English en_US |
| Published: |
World Bank Group, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/01/23795625/entrepreneurship-allocation-government-spending-under-imperfect-markets http://hdl.handle.net/10986/21382 |
| Summary: | Previous studies have established a
negative relationship between total government spending and
entrepreneurship activity. However, the relationship between
the composition of government spending and entrepreneurial
activity has been woefully under-researched. This paper
fills this gap in the literature by empirically exploring
the relationship between government spending on social and
public goods and entrepreneurial activity under the
assumption of credit market imperfections. By combining
macroeconomic government spending data with individual-level
entrepreneurship data, the analysis finds a positive
relationship between increasing the share of social and
public goods at the cost of private subsidies and
entrepreneurship while confirming a negative relationship
between total government consumption and entrepreneurial
activity. The implication may be that expansion of total
government spending includes huge increases in private
subsidies, at the cost of social and public goods, and is
detrimental for entrepreneurship. |
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