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Freedom and Entrepreneurship

Joshua C. Hall, Assistant Professor at the Department of Economics at Beloit College and two colleagues have published a new working paper this month examining the relationship between freedom and entrepreneurship among the 50 states of the United States. The interesting thing about this paper is that Hall and others have been able to break overall freedom down into both personal and economic freedom. This has allowed them to discern that economic freedom—such as lower tax rates, reduced regulation, and fewer trade barriers—rather than personal freedom such as freedom of association, expression and access to education, drives the relationship between freedom and entrepreneurial activity in the data for the 50 states. They also note that “A one-standard-deviation increase in a state’s economic freedom is associated with over 100 new businesses starting per 100,000 residents every per month.”

The take home lesson—jurisdictions which focus on improving economic freedom can reasonably expect it to stimulate higher rates of business creation. New Zealand needs more of this sort of activity to grow its material wealth and standard of living.

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