Do Economic Freedom and Entrepreneurship Impact Total Factor Productivity?

Christian Bjørnskov, Nicolai Juul Foss

    Publikation: Working paperForskning

    136 Downloads (Pure)


    The economics of growth has shown that countries not only grow by deploying higher levels of inputs to production, but also by better allocating whatever resources are at their disposal and by introducing productivity-enhancing innovations. We proffer arguments as to why and how entrepreneurship as well institutions of liberty (i.e., economic freedom, including the rule of law, easy regulations, low taxes and limited government interference in the economy) positively impact total factor productivity (TFP): These institutions allow entrepreneurial experimentation with the combination of factors to take place at low transaction costs. We test these ideas on a unique panel data set derived from Compendia, World Bank data and the Fraser Institute’s economic freedom data. We find that while entrepreneurship positively impacts TFP, the marginal contribution of entrepreneurship to TFP is strongest in economies with substantial government activity.
    UdgiverCenter for Strategic Management and Globalization
    Antal sider43
    ISBN (Trykt)9788791815614
    StatusUdgivet - 2010
    NavnSMG Working Paper


    • Total factor productivity
    • Freedom variables
    • Self-employment