The role of political and economic institutions in informal entrepreneurship

Abstract

PurposeThere has been a diverse range of research on the factors enabling informal entrepreneurship as well as the means to avoid or to eradicate its incidence. However, the authors may also identify how a significant proportion of research on this field of study centres around developing economies and correspondingly justifying the application of such analysis to countries with different levels of economic development as is the case of Europe. The purpose of this paper is to depict the ways in which economic and political institutions influence informal entrepreneurship.Design/methodology/approachTo this end, the authors apply aggregate data at the national level collected from different sources, in particular the World Bank, the Organisation for Economic Cooperation and Development, the Global Entrepreneurship Monitor and Freedom House, for the years between 2006 and 2015 and for 23 European countries amounting to a total of 229 observations (unbalanced panel).FindingsThrough recourse to econometric estimations, based upon multiple regression model methodologies for panel data, the authors may report that the greater the quality of economic and political institutions, the lower the level of informal entrepreneurship.Originality/valueThe authors thus seek to contribute towards a better understanding of the influence of institutions and the policies that may feasibly influence informal entrepreneurship.