New Business Start-Ups, Macro-Economic Policies, and the Welfare State

In the wake of the recent financial crisis, national and supranational governments have promoted entrepreneurialism and business start-ups as a means of overcoming the staggering problems of unemployment. While there has been a lot of debate on the topic and a generally high level of support for founding new businesses, the number of new business start-ups relative to the population size varies substantially across western welfare states. Striking cross-country differences can also be found with regard to the type and size of new enterprises. To what extent can these differences be explained by macro-economic decisions as well as the size and the structure of the welfare state? How do, for example, different labour market policies influence enterprise entries in OECD and EU countries? Do greater expenditures on active labour market policies and, in particular, start-up incentives lead to an increase in the number of new businesses? To address these questions I draw on World Bank data on enterprise entries in advanced industrialized societies between 2004 and 2013. By analysing the scope and nature of newly formed enterprises in OECD and EU countries over time, the paper aims to capture the influence of politics—that is, macro-economic decisions, the size and structure of the welfare state, and labour market policies on entrepreneurial activities and enterprise entries.