Economic freedom and veto players jointly affect entrepreneurship

Abstract

Purpose

The purpose of this paper is to explore how the strength of political veto players affects the long-run credibility of economic institutions and how they jointly affect entrepreneurial activity.

Design/methodology/approach

The authors employ an annual panel covering 30 OECD countries from 1993 to 2011.

Findings

An error correction model identifies a positive and significant short-run effect on self-employment from large government spending at low levels of veto player strength. A static model conversely indicates that smaller government spending is positively associated with entrepreneurship at lower levels of veto player strength in the long run.

Originality/value

The authors are the first to explore the interaction of economic and political institutions in the development of entrepreneurship.

Citation

Lihn, J. and Bjørnskov, C. (2017), "Economic freedom and veto players jointly affect entrepreneurship", Journal of Entrepreneurship and Public Policy, Vol. 6 No. 3, pp. 340-358. https://doi.org/10.1108/JEPP-D-17-00007