The Determinants of Entrepreneurship at the Country Level: A Panel Data Approach

The aim of this study is to analyze the impact of a variety of factors on the total entrepreneurial activity rate (TEA). A panel data approach of 26 developed countries was used to evaluate the simultaneous influence of the factors on TEA (2004–2011). Our findings show an inverse relationship between TEA and the initial capital effort; a direct relation between TEA, monetary freedom, investment freedom, financial market development and education; and a nonlinear concave relationship between TEA and the GDP per capita. The dynamic estimation approach shows a high speed of adjustment between the actual and desired rate of entrepreneurship. Overall, the main findings clarify which potential determinants have a real impact on entrepreneurial activity. Our contribution aims to help economic policymakers in developed countries to gain awareness of the main determinants of entrepreneurial activity at country level and thus to enable better decisions.