Is fiscal policy one of the most important socio-economic drivers for entrepreneurial activity in European Union countries?
Abstract
This research highlights the extent to which fiscal policies, along with government effectiveness, trade, economic growth, and education, influence the entrepreneurial environment, starting from the assumption that the effectiveness of public policies and the public administration support for entrepreneurship has proven to be a trigger for development and a means of reducing social inequalities and increasing well-being. Our analysis is based on a panel threshold regression model, which returns parameters for the predictors, in which there is a changing point in fiscal policy as the threshold variable on entrepreneurship activity. The database consisted of annual data from 2002-2019, referring to the European Union’s member states, presented visually based on the data mapping process to evidence the hierarchy of the EU countries for each of the analysed phenomena. Our results evidenced tax policy, trade, and government effectiveness as significant influential factors in stimulating entrepreneurship in EU countries. Although GDP growth and education positively influenced entrepreneurial activity, the statistical tests did not confirm it. Therefore, Governments can encourage entrepreneurial opportunities through harmonised tax legislation with EU regulations and a lighter regulatory burden and policies that foster competition, lower taxes, increase transparency and provide open access for all businesses.
Keyword : fiscal policy, governance, education, entrepreneurship, dynamic panel threshold model, European Union
How to Cite
Lobonț, O.-R., Costea, F., Vătavu, S., Li, Z.-Z., Țăran, A.-M., & Kononenko, I. (2023). Is fiscal policy one of the most important socio-economic drivers for entrepreneurial activity in European Union countries?. Journal of Business Economics and Management, 24(2), 292–314. https://doi.org/10.3846/jbem.2023.19091
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Grilo, I., & Irigoyen, J. (2006). Entrepreneurship in the EU: To wish and not to be. Small Business Economics, 26(4), 305–318. https://doi.org/10.1007/s11187-005-1561-3
Guo, H., & Cheng, S. (2018). Untargeted incentives and entrepreneurship: An analysis of local fiscal policies and small businesses in Florida. Review of Regional Studies, 48(1), 119–135. https://doi.org/10.52324/001c.8009
Hackler, D. (2012). Unlocking the potential of innovation and entrepreneurship: The role of local policy in cities. SSRN. https://doi.org/10.2139/ssrn.2138170
Hansen, B. (1999). Threshold effects in non-dynamic panels: Estimation, testing, and inference. Journal of Econometrics, 93(2), 345–368. https://doi.org/10.1016/S0304-4076(99)00025-1
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Im K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115, 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
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Kneller, R., & Mc Gowan, D. (2011). Entrepreneurship dynamics, market size and fiscal policy (No. 11003). https://doi.org/10.2139/ssrn.1952665
Kuncoro, H. (2014). The economic impacts of government spending cut: The case of Indonesia. Journal of Advanced Research in Law and Economics, 5(2(10)), 120–135. https://journals.aserspublishing.eu/jarle/article/view/882
Leitão, J., & Capucho, J. (2021). Institutional, economic, and socio-economic determinants of the entrepreneurial activity of nations. Administrative Sciences, 11(1), 26. https://doi.org/10.3390/admsci11010026
Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: asymptotic and finite-sample properties. Journal of Econometrics, 108, 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
Liargovas, P., Psychalis, M., & Apostolopoulos, N. (2022). Fiscal policy, growth and entrepreneurship in the EMU. European Politics and Society, 23(4), 468–489. https://doi.org/10.1080/23745118.2021.1895553
Lobonț, O.-R., Nicolescu, A.-C., Costea, F., Li, Z.-Z., Țăran, A.-M., & Davidescu, A. A. (2022). Panel threshold model to capture the nonlinear nexus between public policy and entrepreneurial activities in EU countries. Mathematics, 10, 1265. https://doi.org/10.3390/math10081265
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Mankiw, G. (2014). Principles of Economics (7 ed.). Southwestern Publishing Group.
Martínez-Rodriguez, I., Callejas-Albiñana, F. E., & Callejas-Albiñana, A. I. (2020). Economic and socio-cultural drivers of necessity and opportunity entrepreneurship depending on the business cycle phase. Journal of Business Economics and Management, 21(2), 373–394. https://doi.org/10.3846/jbem.2020.11848
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