Jacob Lihn and Christian Bjørnskov
The purpose of this paper is to explore how the strength of political veto players affects the long-run credibility of economic institutions and how they jointly affect…
Abstract
Purpose
The purpose of this paper is to explore how the strength of political veto players affects the long-run credibility of economic institutions and how they jointly affect entrepreneurial activity.
Design/methodology/approach
The authors employ an annual panel covering 30 OECD countries from 1993 to 2011.
Findings
An error correction model identifies a positive and significant short-run effect on self-employment from large government spending at low levels of veto player strength. A static model conversely indicates that smaller government spending is positively associated with entrepreneurship at lower levels of veto player strength in the long run.
Originality/value
The authors are the first to explore the interaction of economic and political institutions in the development of entrepreneurship.