Resource title

Do economic freedom and entrepreneurship impact total factor productivity?

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Resource description

The economics of growth has shown that countries not only grow by deploying higherlevels of inputs to production, but also by better allocating whatever resources are at theirdisposal and by introducing productivity-enhancing innovations. We proffer argumentsas to why and how entrepreneurship as well institutions of liberty (i.e., economicfreedom, including the rule of law, easy regulations, low taxes and limited governmentinterference in the economy) positively impact total factor productivity (TFP): Theseinstitutions allow entrepreneurial experimentation with the combination of factors to takeplace at low transaction costs. We test these ideas on a unique panel data set derivedfrom Compendia, World Bank data and the Fraser Institute’s economic freedom data. Wefind that while entrepreneurship positively impacts TFP, the marginal contribution ofentrepreneurship to TFP is strongest in economies with substantial government activity.

Resource author

Christian Bjørnskov, Nicolai J. Foss

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Resource publish date

Resource language

eng

Resource content type

application/pdf

Resource resource URL

http://hdl.handle.net/10398/8174

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