Politics, Entrepreneurship and Economic Growth. A global analysis on the impact of country-level public policies

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Alessandro Niccolò Tirapani 
Politics, Entrepreneurship and Economic Growth 
ABSTRACT 
 
Entrepreneurship has been considered, since more than 150 years, the “raw material” needed 
by a capitalist system to develop and grow. The individual initiative, anyway, have 
encountered different settings and regulations, as the democratic systems developed a more 
and more complex web of legislations. Consequently, academic literature have been arguing 
that lower bureaucracy leads to higher levels of entrepreneurship, which in turns causes 
economic growth. Since the Regan-Thatcher revolution, public policies are expected to go 
more and more liberal: but, does countries with lower bureaucracy actually experience more 
individuals‟ entrepreneurial activity? If yes, which policies are actually relevant? Posing these 
questions, in this thesis I gather global data from the Global Entrepreneurship Monitor 
(GEM), comparing the Total Early-Stage Entrepreneurial Activity scores (TEA) with the ease 
of doing business, the latter taken from the World Bank Doing Business Report (WBDB). 
Using both 2010 and 2008-2010 TEA data for 31 countries, I find that entrepreneurship is 
more present in countries whose specific public policies are more efficient and less expensive; 
easier procedures to register a property, higher protection of investors, lower minimum capital 
requirement to start a business, lower total fiscal pressure and lower cost to close a business, 
are the main factors leading to higher entrepreneurial levels. 
 
L‟entreprenariat a toujours été considéré comme étant le «matériel brut» auquel un système 
capitaliste a besoin pour se développer et grandir, mais les initiatives individuelles ont 
rencontrés plusieurs empêchements au fur et à mesure que les systèmes démocratiques 
développaient de nouvelles législations. En conséquence, des écrits académiques ont avancés 
l‟hypothèse qu‟une bureaucratie légère conduits à un haut niveau d‟entreprenariat amenant 
ainsi une croissance économique. Mais est-ce qu‟un pays avec une petite administration voit 
réellement une monté de l‟entreprenariat individuelle? Et si oui, quelles politiques sont 
réellement pertinentes? Après avoir posé ces questions j‟ai rassemblé dans ce mémoire des 
données du GEM, et spécifiquement les chiffres du TEA, et je ai compare cette avec le 
données sur la facilité de faire des affaires à partir du WBDB. Utilisant à la fois les donnés du 
TEA de 2010 et 2008-2010 pour 31 pays, j‟ai trouvé que les facteurs principaux conduisant à 
un plus haut niveau d‟entreprenariat se retrouvent dans des pays avec procédures 
d‟enregistrement de propriété plus facile, plus haute protection des investisseurs, un capital 
minimum plus bas demandé pour commencer une entreprise, une pression fiscale plus basse 
et un coût moindre lors de la fermeture de l‟entreprise. 
L’Amor che move il Sole e l’altre Stelle 
(Dante Alighieri, Paradiso XXXIII, 145)
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Alessandro Niccolò Tirapani 
Politics, Entrepreneurship and Economic Growth 
1 EXECUTIVE SUMMARY
†
 
 
Politics and entrepreneurship do share some characteristics: are both influenced by 
managers/decision makers and are both considered responsible for the economic growth of 
countries. Classic academic literature have celebrated the role of businessmen, and namely the 
entrepreneurial spirit of individuals, able to foster the wealthy growth of a capitalist system. 
Politics has been at the center of several debates as well, also emphasizing the negative 
impact of too much interference of the State in the market. Excessive regulations, laws and 
bureaucratic monetary and non monetary costs have been blamed to restrain the personal 
initiative and creativity needed to improve humans‟ living conditions and wealth. A key role 
has been played by the XX century contraposition between the capitalist-liberist/USA 
centered and the communist-planned economy/Russian centered world, ended with the 
collapse of the latter and for that taken as a dogmatic sample of what should not be followed. 
Academic research is therefore asked to enquiry today if public policies actually do stimulate 
or inhibit entrepreneurship, and if yes, which of them. Anyway, comprehensive global 
databases to be tested were not available at least until mid Eighties; on top of that, the Global 
Entrepreneurship Monitor database (Kelley, Bosma & Amoros, 2011), GEM, do exist only 
since 1999, and have introduced a whole new approach in measuring entrepreneurial activity. 
Taking advantage of the actual availability of these sources, in this thesis I analyze the 
relationship between the level of entrepreneurship occurring in a basket of 31 countries, 
measured through the GEM, and the public policies enforced by the Governments of these 
countries, through the Doing Business Report of the World Bank (World Bank, 2011a,b). 
This work starts with an introduction, section 2, showing the roots of the deregulation spirit in 
the Thatcher-Regan liberal revolution, often embodied by Milton Friedman, and the actual 
need of developing zero-cost policies able to restart the economic growth after the 2008 and 
2011 crisis (the latter going on when this thesis is being written). The research question, 
stemming from the observation of in reality the propagation of the public policies up to the 
business decision makers is distorted, asks: do countries with higher scores in the Doing 
Business Report experience higher rates of TEA? If yes, which of the 9 indicators, or of the 
36 sub-indicators, have a significant impact? 
In the sequent section 3 is reported the main literature on the topics “public policy”, 
“entrepreneurship” and “economic growth”. Most part of authors do link liberal policies and 
                                            
†
 The views, opinions and comments expressed in this work are those of the author, and do not necessary reflect 
the positions of the University or of the Professors. The author can be reached at [email protected]
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Alessandro Niccolò Tirapani 
Politics, Entrepreneurship and Economic Growth 
economic growth, or entrepreneurship and economic growth, but literature on the effects of 
liberal policies on entrepreneurship is pretty scarce, or at least recent. In the very end, four 
main authors have been gathered: the first two (Braunerhjelm, 2010 and Stevenson & 
Lundström, 2001) do not use GEM database, but show a positive effect of some liberal 
policies, like low taxation on self-employment income or capital gain, access to capitals and 
the intuitively enter and exit monetary and non-monetary barriers; the other two use GEM, 
and while Ardegna & Lusardi (2009) find a negative correlation with business entry 
regulation, Van Stel et al. (2007) find that only higher minimum capital requirement and more 
strict labor market conditions/regulations have a negative effect on entrepreneurship. 
Considered this findings, I set three hypothesis: (1) higher entry barriers, have a negative 
effect on TEA scores; (2) higher taxation have a negative effect on TEA rates; (3) long term 
factors affect entrepreneurship as well: better financing opportunity and efficiency in closing 
a business, have a positive effect on TEA. Methods used are listed in section 4: TEA is the 
only dependent variable and the analysis is divided in a synchronic, using 2010 TEA data, and 
in a diachronic one, using TEA 2008-2010 data. The countries selection process is then 
reported. Data are standardized and processed using SPSS 19. Session 5 reports descriptive 
statistics, correlations tables and the main significant regressions obtained (4 for the 
synchronic analysis and 3 for the diachronic). 
Discussion is reported in section 6: collinearity affects several main variables, since GDP per 
capita is a mediator between TEA scores and several independent variables. Nonetheless, I 
find that entrepreneurship is more present in countries whose specific policies are more 
efficient and less expensive. Namely, the significant independent variables non correlated 
with GDP the capita “procedures to register a property”, “protection of investors”, 
“procedures to trade internationally”, “minimum capital requirement to start a business”, 
“total fiscal pressure” and “cost to close a business” are the main factors leading to higher 
entrepreneurial levels. In the last paragraphs of section 6 are enlisted five main limits that may 
have affected the research. Conclusions are presented in section 7, along with suggestions for 
further research and acknowledgments. At the end of work an appendix shows the calculus 
made to process data, and finally the section hosting the Notes close this thesis. 
 
I believe that this work can help to cast a light on the contemporary research in the field, 
facilitating policy-makers to implement effective strategies and policies; what is more, I 
believe it can help to develop a better informed public opinion on a topic that do affects the 
political, social and economic perspective of everybody of us.
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Alessandro Niccolò Tirapani 
Politics, Entrepreneurship and Economic Growth 
FOREWORDS 
 
The discussion of a thesis is the very final judgment for an academic work at Master level. No 
exception has been this case: some caveant have emerged, and the most relevant are hereafter 
reported. 
 
Public policies are studied, in this thesis, at a country-level, using given values: nevertheless, I 
have argued as well that these policies are not determined equally throughout all states or 
nations, since decision makers pursue this or that policy following local-related variables (i.e., 
political orientation of the government or of the parliament, belonging to a wider international 
institution –like the European Union or the NAFTA–, higher vs. lower skills of the political 
and business actors, etc.). Consequently, an assumption of the quantitative analysis to be 
added is: Doing Business scores (World Bank, 2011a and 2011b) are assumed exogenous as, 
at this level of analysis, a more extensive inquiry simply would not be feasible. 
This limitation opens new interesting opportunities of further research, such like the origins of 
the same specific policy in different countries. In doing so, academic research may eventually 
acquire a new key link between political processes and business. 
A second point has been made on the claimed necessity of better mathematical instruments: 
even if more powerful scientific tools are definitely a step toward more explanatory power, in 
this field is more urgent the availability of better, wider and more reliable data.  
Finally, another suggestion for future studies that has emerged, suggested the addition of a 
real pragmatic approach, ideally starting from the conclusions of this thesis: how a new 
appointed Minister of Economic Affairs may actively use these results? 
 
I here thank another time my Professors, both for these bright remarks, and for the deep 
interest demonstrated for this demanding work. 
Final grade: 5,5/6