In search of the marginal entrepreneur: Benchmarking regulatory frameworks in their effect on entrepreneurship

This paper develops a benchmarking method in order to assess how legal and regulatory frameworks provide adequate incentives for entrepreneurship. The analysis is based on a dataset that combines individual data on entrepreneurship with indicators about the restrictiveness of regulations. The subjective aspect of entrepreneurial ventures is controlled for using a variable that captures the expectations of entrepreneurs regarding their businesses. This makes the marginal effect of regulation observable. Moreover, a distinction between different types of entrepreneurs allows to search for possible transmission channels of regulatory influences. The method is static and designed for cross-country comparisons and can be used to identify policy areas which are successfully applied in certain countries.