ABSTRACT. We run panel regressions to test the impact of economic freedom in the 50 states on five different measures of Entrepreneurship. We find that higher average levels of economic freedom lead to higher average business birth rates and, in some cases, more patents per capita in a state. When we examine the subcomponents of the freedom index we find that smaller size of government is important for higher levels of business births and patents. We find no consistent significant connection between economic freedom and venture capital per capita, sole proprietorship rates, or the Kauffman index of entrepreneurship. pp. 67–87

JEL codes: L26, M13, O43

Keywords: entrepreneurship, startups, institutions and growth

The Effect of Personal and Economic Freedom on Entrepreneurial Activity: Evidence from a New State Level Freedom Index