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Where Does Regulation Hurt? Evidence From New Businesses Across Countries

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Executive Summary

The authors use two micro data sets that collect harmonized data across countries to investigate the effects of regulation on new businesses. They are able to distinguish between two types of entrepreneurs: those who start a business to pursue a business opportunity and those who start a business because they could not find better work. Irrespective of the measure of regulation they use, they always find a detrimental effect of regulation on entrepreneurship. While women are overall less likely to start new businesses, in more regulated countries women are pulled into entrepreneurship not to pursue a business opportunity but because they could not find better work. Moreover, regulation dampens the effects of self-assessed business skills and social networks.

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