Size of government and entrepreneurship. Analysis of three groups of countries with different economic development

Abstract

This study analyzes the impact of the "size of government" in entrepreneurial activity for countries with different levels of economical development. It has been used the variables "size of government" of the economic freedom indices released by the Economic Freedom Network (2000-2009) and by The Heritage Foundation (2000-2011), and the variables of "entrepreneurship" released by the Global Entrepreneurship Monitor. Furthermore, the same analysis has been carried out grouping the countries by development level, following the classification elaborated by the World Economic Forum. Statistical analyses of correlations have shown that the “size of government” is related to entrepreneurship. The variables "Size of Government: Expenditures, Taxes and Enterprises" and " Government Size” have revealed a positive correlation with the total, opportunity and necessity entrepreneurial activity indices for the economies based on efficiency and innovation, thus less taxes on income and lower government spending, increase the entrepreneurship of the country. In “factor driven economies”, there is no relationship between the size of government and entrepreneurship