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- Title
Government investments and entrepreneurship.
- Authors
Faria, João Ricardo; Ogura, Laudo; Prado, Mauricio; Boudreaux, Christopher J.
- Abstract
How can governments attract entrepreneurs and their businesses? The view that new business creation grows with the optimal level of government investment remains appealing to policymakers. In contrast with this active approach, we build a model where governments may adopt a passive approach to stimulating business creation. The insights from this model suggest new business creation depends positively on factors beyond government investments—attracting high-skilled migrants to the region and lower property prices, taxes, and fines on firms in the informal sector. These findings suggest whether entrepreneurs generate business creation in the region does not only depend on government investments. It also depends on location and skilled migration. Our model also provides methodological implications—the relationship between government investments and new business creation is endogenously determined, so unless adjustments are made, econometric estimates will be biased and inconsistent. We conclude with policy and managerial implications. Plain English Summary: Governments can attract entrepreneurs and their businesses by offering incentives such as lower property prices, taxes, and fines on firms in the informal sector, as well as by encouraging skilled migration to the region. Thus, a policy implication is that the government can create a favorable environment for business creation as opposed to solely relying on government investments.
- Subjects
PUBLIC investments; POLITICAL entrepreneurship; BUSINESSPEOPLE; INFORMAL sector; REAL property sales &; prices
- Publication
Small Business Economics, 2023, Vol 61, Issue 4, p1657
- ISSN
0921-898X
- Publication type
Article
- DOI
10.1007/s11187-023-00743-9