Entrepreneurship and the Allocation of Government Spending Under Imperfect Markets

Previous studies have established a negative relationship between total government spending and entrepreneurship activity. However, the relationship between the composition of government spending and entrepreneurial activity has been woefully under-researched. This paper fills this gap in the literature by empirically exploring the relationship between government spending on social and public goods and entrepreneurial activity under the assumption of credit market imperfections. By combining macroeconomic government spending data with individual-level entrepreneurship data, the analysis finds a positive relationship between increasing the share of social and public goods at the cost of private subsidies and entrepreneurship while confirming a negative relationship between total government consumption and entrepreneurial activity. The implication may be that expansion of total government spending includes huge increases in private subsidies, at the cost of social and public goods, and is detrimental for entrepreneurship.

Bibliographic Details

Main Author:	Islam, Asif
Language:	English en_US
Published:	World Bank Group, Washington, DC 2015-01
Subjects:	BENCHMARK, BENEFICIARIES, BORROWING, BUSINESS ANGEL, BUSINESS ANGELS, BUSINESS ECONOMICS, BUSINESS OWNERSHIP, CAPITA GROWTH, CAPITAL INVESTMENT, COMPETITIVE MARKETS, CREDIT CONSTRAINT, CREDIT CONSTRAINTS, CREDIT MARKET, CREDIT MARKET FAILURES, CURRENCY, DEVELOPING COUNTRIES, DEVELOPMENT BANK, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC POLICIES, ECONOMIC POLICY, ECONOMIC THEORY, EDUCATION LEVELS, EDUCATION QUALIFICATION, EDUCATION SPENDING, EMPLOYMENT STATUS, ENTREPRENEUR, ENTREPRENEURIAL ACTIVITIES, ENTREPRENEURIAL ACTIVITY, ENTREPRENEURIAL SUCCESS, ENTREPRENEURS, EXPECTED RETURNS, EXPENDITURES, EXTERNALITIES, FEMALE ENTREPRENEURSHIP, FISCAL POLICY, FUNDING SOURCE, GDP PER CAPITA, GENDER, GENERAL EQUILIBRIUM ANALYSIS, GOVERNMENT CONSUMPTION, GOVERNMENT DEBT, GOVERNMENT FINANCE, GOVERNMENT FINANCE STATISTICS, GOVERNMENT INTERVENTION, GOVERNMENT INVOLVEMENT, GOVERNMENT REGULATIONS, GOVERNMENT SPENDING, GOVERNMENT SUBSIDIES, GROWTH RATE, HEALTH SPENDING, HOLDING, HOUSING, HUMAN CAPITAL, INCOME STREAM, INFLATION, INFORMATION ­ INFRASTRUCTURE, INTEREST RATE, INTERNATIONAL BANK, INTERNATIONAL MONETARY FUND, INVESTMENT SPENDING, JOB CREATION, LEVEL OF RISKS, MACROECONOMIC CONTROLS, MACROECONOMICS, MARKET FAILURE, MARKET FAILURES, MICRO ENTERPRISES, MONETARY FUND, MORAL HAZARD, NETWORK EXTERNALITIES, NEW BUSINESSES, OPPORTUNITY COST, OPPORTUNITY COSTS, POLITICAL ECONOMY, POSITIVE COEFFICIENT, POSITIVE COEFFICIENTS, POSITIVE EXTERNALITIES, PRIVATE INVESTMENT, PRIVATE PROPERTY, PRIVATE PROPERTY RIGHTS, PRIVATE SECTOR, PROPERTY RIGHTS, PUBLIC, PUBLIC GOOD, PUBLIC GOODS, REAL GDP, RECESSION, RENT SEEKING, RETURN, RETURNS, SAFETY NETS, SELF EMPLOYMENT, SELF-EMPLOYMENT, SHARE OF INVESTMENT, SMALL BUSINESS, SOCIAL NETWORK, SOCIAL SECURITY, SOCIAL SECURITY SPENDING, START-UP, START-UPS, WAGES, WELFARE BENEFITS,
Online Access:	http://documents.worldbank.org/curated/en/2015/01/23795625/entrepreneurship-allocation-government-spending-under-imperfect-markets https://hdl.handle.net/10986/21382
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