Entrepreneurial activity affected by degree of states' economic freedom

Oct 15, 2008

A new study in the journal Entrepreneurship Theory and Practice examines how entrepreneurial activity and level of employment in U.S. service industries respond to changes in the degree of economic freedom among states. Researchers found that the relationship between entrepreneurial outcomes and economic freedom varies significantly by industry.

Stephan F. Gohmann, Bradley K. Hobbs, and Myra McCrickard used data from economic freedom indexes for each state in the U.S. and from the U.S. Census Bureau to examine the effects of economic freedom on industry growth rates.

Results present the following dichotomy: some service industries exhibit firm and employment growth as economic freedom rises while other service industries grow as economic freedom declines.

For example, business and personal services firms are relatively small, and states with greater economic freedom typically have fewer regulations that lower the costs for smaller firms. Consequently, entrepreneurs are more able to grow these services during times of increased economic freedom.

Conversely, legal services grow in response to decreased economic freedom and heightened government regulation because firms affected by these policies increasingly require legal services. Similarly, health and social services respond to demand generated from government programs and grow as the government's purview broadens.

As such results relate to government policy, the authors conclude that: "Policy makers should consider both the spillover effects of targeted policies as well as the direct effects of changes in economic freedom on entrepreneurial decision making."

Source: Wiley

Explore further: Was it unethical to hoax the world about chocolate as a weight loss 'accelerator'?

Related Stories

EPA says first day of oil spill spent 'planning'

4 hours ago

On the afternoon of the largest coastal oil spill in California in 25 years, graduate student Natalie Phares quickly organized a volunteer bucket brigade to clean a beach north of Santa Barbara.

Insect mating behavior has lessons for drones

4 hours ago

Male moths locate females by navigating along the latter's pheromone (odor) plume, often flying hundreds of meters to do so. Two strategies are involved to accomplish this: males must find the outer envelope ...

Recommended for you

Bacteria renew mystery over Chilean poet Neruda's death

May 28, 2015

Family of Chilean poet Pablo Neruda said Thursday forensic experts have found evidence of a massive bacterial infection in his remains, increasing their suspicion that he was poisoned by dictator Augusto Pinochet's regime.

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.