Does Trust Matter for Entrepreneurship: Evidence from a Cross-Section of Countries
Abstract
:1. Introduction
2. Conceptual Framework
3. Data and Descriptive Findings
“there should be detailed information about the applied data set and the sources of the variables. The 14 individual pillars of entrepreneurship used in the construction of our index are calculated by involving more than 963,000 individuals from the 71 countries. The pillars themselves are constructed through an interaction of individual level and institutional variables. All of the institutional variables are from the Global Competitiveness Index; others are from the Doing business, Index of economic Freedom or from multinational organizations such as the UNIDO or OECD. While we tried to find a single institutional variable for each of the individual variables, sometimes it proved to be not executable. Therefore some of these institutional variables are themselves complex ‘indexes’. Comparing to the previous versions of our index, we avoided the duplication or the multiplication of the same institutional factors in different part of the index.”
4. Empirical Model
“I firstly include a dummy for whether countries are monarchies, which Bjørnskov (2007) finds to be approximately eight percentage points more trusting than countries without hereditary institutions. Secondly, I follow Tabellini’s (2008) approach of study in including a dummy variable for whether a country’s predominant language allows dropping the subjective pronoun, that is, Chomsky’s (1981) ‘pro-drop’ characteristic. Tabellini’s argument rests on Kashima and Kashima (1998) in arguing that cultures in which the language forbids dropping the personal pronoun traditionally have been more respectful of individual rights and have therefore developed stronger trust norms” (Bjørnskov, 2012:6) […]These are supplemented by the average temperature in the coldest month of the year, based on the premise, dating back to Aristotle, that trust and social cohesion historically has been relatively more important for survival in regions with cold winters, and that cultures of such regions may have selected high-trust institutions through an evolutionary process”.(Bjørnskov, 2010 [16]: p. 336)
5. Econometric Findings
5.1. Regression Results with the Global Entrepreneurship and Development Index (GEDI)
5.1.1. Main Regression Results
5.1.2. Robustness Checks
5.2. Regression Results with Sub-Indexes
6. Conclusions
Acknowledgments
Author Contributions
Conflicts of Interest
References
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- 1This study focuses on the period from 2002 to 2011.
- 2See Doepke and Zilibotti (2014) [59] for a model.
- 3As suggested in the literature (see, Hafer and Jones, 2015 [31]), both variables—IQ and schooling years—can be maintained in the same regression so as to capture competing aspects of human capital.
- 4See Lynn and Vanhanen (2012) [72] for literature on this subject.
- 5Some regions were dropped due to multicollinearity.
Variables | Sources |
---|---|
Entrepreneurship | Acs and Szerb, (2010) [38]. |
Gini | GINI coefficient (UNDP, Human Development Report, 2004 [60]) |
Post-communist | Dummy variable. Author’s own |
Economic freedom | 2010 Index of Economic Freedom (Heritage Foundation [61]) |
Social trust | World Values Survey (2010) [62] |
IQ | Lynn and Meisenberg, (2010) [63] |
Regulatory quality | World Bank Governance indicator. The measures come from the dataset compiled by Kaufmann, Kraay and Mastruzzi at the World Bank, (2010) [64] |
MENA | Dummy variable. Author’s own |
High income | Dummy variable. Author’s own |
East Asia and Pacific | Dummy variable. Author’s own |
Sub-Saharan Africa | Dummy variable. Author’s own |
Education 1 (average years of schooling in population aged 25 and above) | Barro and Lee (2011) [65] |
Education 2 (average years of schooling in population aged 15 and above) | Barro and Lee (2011) [65] |
Log GDP per capita | Pen World Tables 7v (2010) [66] |
Africa | Dummy variable. Author’s own |
Americas | Dummy variable. Author’s own |
Asia | Dummy variable. Author’s own |
Europa | Dummy variable. Author’s own |
Oceania | Dummy variable. Author’s own |
Variable | Obs | Mean | Std. Dev. | Min | Max |
---|---|---|---|---|---|
Entrepreneurship | 60 | 0.39 | 0.18 | 0.1 | 0.76 |
Gini | 54 | 36.65 | 9.39 | 24.00 | 59.00 |
Post-communist | 60 | 0.20 | 0.40 | 0.00 | 1.00 |
Economic freedom | 60 | 66.20 | 10.25 | 37.10 | 89.70 |
Trust | 53 | 30.42 | 15.57 | 5.77 | 64.27 |
IQ | 59 | 93.19 | 8.28 | 72.00 | 108.00 |
Regulatory quality | 52 | 0.58 | 0.90 | −1.35 | 1.94 |
MENA | 60 | 0.18 | 0.39 | 0.00 | 1.00 |
High income | 60 | 0.53 | 0.50 | 0.00 | 1.00 |
East Asia and Pacific (EAP) | 60 | 0.03 | 0.18 | 0.00 | 1.00 |
Sub-Saharan Africa (SSA) | 60 | 0.02 | 0.13 | 0.00 | 1.00 |
Education 1 | 51 | 8.97 | 2.43 | 3.86 | 13.09 |
Education 2 | 51 | 9.14 | 2.15 | 4.32 | 12.75 |
Log GDP per capita | 52 | 9.51 | 1.44 | 4.86 | 12.44 |
Africa | 60 | 0.10 | 0.30 | 0.00 | 1.00 |
Americas | 60 | 0.10 | 0.30 | 0.00 | 1.00 |
Asia | 60 | 0.28 | 0.45 | 0.00 | 1.00 |
Europa | 60 | 0.35 | 0.48 | 0.00 | 1.00 |
Oceania | 60 | 0.18 | 0.39 | 0.00 | 1.00 |
1 | 2 | 3 | 4 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | |
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 Entrepreneurship | 1.00 | |||||||||||||
2 Gini | −0.41 | 1.00 | ||||||||||||
3 Post communist | −0.23 | −0.27 | 1.00 | |||||||||||
4 Economic freedom | 0.79 | −0.27 | −0.21 | 1.00 | ||||||||||
5 IQ | 0.68 | −0.62 | 0.18 | 0.54 | 1.00 | |||||||||
6 Trust | 0.71 | −0.47 | −0.27 | 0.56 | 0.51 | 1.00 | ||||||||
7 Regulatory quality | 0.79 | −0.48 | −0.02 | 0.79 | 0.70 | 0.49 | 1.00 | |||||||
8 Log GDP per capita | 0.76 | −0.41 | 0.00 | 0.64 | 0.71 | 0.56 | 0.73 | 1.00 | ||||||
9 Education 1 | 0.72 | −0.45 | 0.20 | 0.66 | 0.77 | 0.43 | 0.73 | 0.83 | 1.00 | |||||
10 Education 2 | 0.70 | −0.42 | 0.17 | 0.67 | 0.75 | 0.42 | 0.72 | 0.83 | 0.99 | 1.00 | ||||
11 High income | 0.19 | −0.20 | 0.05 | 0.13 | 0.37 | 0.08 | 0.30 | 0.12 | 0.34 | 0.31 | 1.00 | |||
13 Entrepreneurial activity | 0.95 | −0.40 | −0.24 | 0.73 | 0.62 | 0.74 | 0.74 | 0.69 | 0.63 | 0.62 | 0.60 | 1.00 | ||
14 Entrepreneurial aspiration | 0.90 | −0.45 | −0.11 | 0.71 | 0.66 | 0.55 | 0.74 | 0.69 | 0.76 | 0.73 | 0.80 | 0.90 | 1.00 | |
12 Entrepreneurial attitudes | 0.92 | −0.30 | −0.26 | 0.75 | 0.61 | 0.65 | 0.71 | 0.74 | 0.64 | 0.64 | 0.81 | 0.92 | 0.72 | 1.00 |
Social Trust | ||||
---|---|---|---|---|
Entrepreneurship | Entrepreneurial Attitudes | Entrepreneurial Activity | Entrepreneurial Aspiration | |
Monarchy | 5.214 (3.946) | 7.197 ** (3.672) | 7.197 ** (3.672) | 7.197 ** (3.672) |
Pronoun drop | 10.819 *** (3.813) | 8.709 ** (3.820) | 8.709 ** (3.820) | 8.709 ** (3.820) |
Temperature | 0.124 (0.262) | −0.360 (0.281) | −0.360 (0.281) | −0.360 (0.281) |
R² | 0.86 | 0.84 | 0.84 | 0.84 |
Obs | 39 | 39 | 39 | 39 |
Variables | Model 1 | Model 2 | Model 3 | Model 4 |
---|---|---|---|---|
Trust | 0.008 *** (0.001) | 0.003 * (0.001) | 0.003 * (0.001) | 0.006 ** (0.003) |
Gini | −0.000 (0.002) | −0.001 (0.002) | 0.002 (0.004) | |
Post-communist | −0.091 * (0.048) | −0.106 * (0.045) | −0.037 (0.093) | |
IQ | 0.004 (0.003) | 0.004 (0.003) | 0.004 (0.004) | |
Economic freedom | 0.006 * (0.003) | 0.006 * (0.002) | 0.004 (0.003) | |
High income | −0.010 (0.028) | −0.019 (0.027) | −0.007 (0.041) | |
Education 1 | 0.022 * (0.010) | 0.019 * (0.008) | 0.012 (0.015) | |
SSA | 0.010 (0.032) | 0.051 (0.068) | ||
MENA | −0.076 ** (0.045) | −0.083 (0.072) | ||
EAP | −0.074 ** (0.041) | −0.138 (0.103) | ||
R² | 0.50 | 0.82 | 0.83 | 0.86 |
Obs | 53 | 47 | 47 | 39 |
Sargan | 0.30 | |||
Basmann | 0.42 | |||
OLS | Yes | Yes | Yes | No |
2SLS | No | No | No | Yes |
Variables | Model 1 | Model 2 | Model 3 | Model 4 | Model 5 | Model 6 | Model 7 |
---|---|---|---|---|---|---|---|
Trust | 0.008 *** (0.002) | 0.003 * (0.000) | 0.029 * (0.001) | 0.003 * (0.001) | 0.003 * (0.001) | 0.003 * (0.001) | 0.008 * (0.004) |
Gini | −0.000 (0.001) | −0.001 (0.001) | −0.000 (0.002) | −0.001 (0.002) | −0.001 (0.002) | 0.004 (0.006) | |
Post-communist | −0.091 * (0.026) | −0.106 * (0.026) | −0.129 ** (0.043) | −0.115 ** (0.041) | −0.120 * (0.049) | −0.022 (0.110) | |
IQ | 0.004 (0.002) | 0.004 (0.002) | 0.003 (0.002) | 0.003 (0.003) | 0.004 (0.003) | 0.004 ** (0.004) | |
Economic freedom | 0.006 (0.003) | 0.006 (0.003) | 0.005 (0.002) | 0.008 *** (0.002) | 0.005 * (0.002) | 0.004 (0.005) | |
High income | −0.010 (0.020) | −0.018 (0.019) | −0.005 (0.024) | −0.014 (0.023) | −0.012 (0.030) | 0.020 (0.049) | |
Education 1 | 0.022 (0.011) | 0.019 (0.011) | 0.022 (0.008) | 0.019 * (0.007) | 0.020 * (0.010) | 0.011 (0.014) | |
SSA | 0.010 (0.030) | −0.015 (0.034) | 0.023 (0.037) | −0.021 (0.064) | -0.019 * (0.043) | ||
MENA | −0.076 * (0.035) | −0.071 (0.045) | −0.047 (0.043) | −0.076 * (0.044) | −0.033 ** (0.068) | ||
EAP | −0.074 (0.044) | −0.069 (0.044) | −0.023 (0.041) | −0.134 *** (0.093) | |||
R² | 0.50 | 0.82 | 0.83 | 0.86 | 0.87 | 0.88 | |
Obs | 53 | 47 | 47 | 46 | 45 | 47 | 37 |
Outliers | Slovenia | Slovenia Venezuela | Slovenia Venezuela | ||||
IWLS | No | No | No | No | No | Yes | No |
OLS | Yes | Yes | Yes | Yes | Yes | No | No |
2SLS | No | No | No | No | No | No | Yes |
Variables | Model 1 | Model 2 | Model 3 | Model 4 |
---|---|---|---|---|
Trust | 0.004 *** (0.001) | 0.003 * (0.001) | 0.003 * (0.002) | 0.007 * (0.003) |
Gini | 0.001 (0.002) | 0.001 (0.003) | −0.001 (0.003) | 0.004 (0.005) |
Post-communist | −0.084 ** (0.042) | −0.099 * (0.043) | −0.113 * (0.051) | −0.076 (0.074) |
IQ | 0.003 (0.002) | 0.004 (0.004) | 0.003 (0.004) | 0.006 (0.004) |
Regulatory quality | 0.075 *** (0.024) | 0.075 *** (0.028) | 0.086 ** (0.030) | 0.023 (0.039) |
Log GDP per capita | 0.012 (0.016) | 0.007 (0.021) | −0.010 (0.022) | −0.002 (0.026) |
Education 2 | 0.015 (0.010) | 0.017 ** (0.010) | 0.019 (0.013) | 0.024 * (0.013) |
Africa | 0.014 (0.075) | −0.032 (0.086) | 0.0061 (0.076) | |
Asia | −0.027 (0.084) | −0.104 (0.087) | −0.071 (0.078) | |
Europe | −0.022 (0.063) | −0.069 (0.081) | −0.000 (0.057) | |
Oceania | 0.008 (0.057) | −0.035 (0.083) | −0.024 (0.051) | |
Americas | −0.004 (0.075) | −0.035 (0.090) | 0.017 (0.073) | |
R² | 0.82 | 0.83 | 0.88 | |
Obs | 47 | 47 | 47 | 37 |
IWLS | No | No | Yes | No |
OLS | Yes | Yes | No | Yes |
2SLS | No | No | No | No |
Outliers | Slovenia Venezuela |
Entrepreneurial Attitudes | Entrepreneurial Activity | Entrepreneurial Aspiration | |||||||
---|---|---|---|---|---|---|---|---|---|
Trust | 0.004 * (0.002) | 0.003 ** (0.001) | 0.013 *** (0.004) | 0.005 *** (0.002) | 0.006 *** (0.002) | 0.008 (0.006) | 0.000 (0.001) | 0.000 (0.001) | −0.001 (0.004) |
Method | OLS | IWLS | 2SLS | OLS | IWLS | 2SLS | OLS | IWLS | 2SLS |
R² | 0.7538 | 0.83 | 0.7693 | 0.78 | 0.76 | 0.77 | |||
Obs | 47 | 47 | 47 | 47 | 47 | 47 | 47 | 47 | 39 |
Sargan | 0.198 | 0.303 | 00.082 | ||||||
Basmann | 0.308 | 0.428 | 0.148 | ||||||
Robustness Checks Using Alternative Conditioning Variables | |||||||||
Trust | 0.003 * (0.002) | 0.003 (0.002) | 0.010 * (0.004) | 0.006 *** (0.002) | 0.006 *** (0.002) | 0.006 (0.005) | 0.001 (0.001) | 0.001 (0.001) | 0.001 (0.004) |
Method | OLS | IWLS | 2SLS | OLS | IWLS | 2SLS | OLS | IWLS | 2SLS |
R² | 0.76 | 0.84 | 0.76 | 0.77 | 0.72 | 0.70 | |||
Obs | 39 | 39 | 39 | 39 | 39 | 39 | 39 | 39 | 39 |
© 2016 by the authors; licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons by Attribution (CC-BY) license (http://creativecommons.org/licenses/by/4.0/).
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Kodila-Tedika, O.; Agbor, J. Does Trust Matter for Entrepreneurship: Evidence from a Cross-Section of Countries. Economies 2016, 4, 4. https://doi.org/10.3390/economies4010004
Kodila-Tedika O, Agbor J. Does Trust Matter for Entrepreneurship: Evidence from a Cross-Section of Countries. Economies. 2016; 4(1):4. https://doi.org/10.3390/economies4010004
Chicago/Turabian StyleKodila-Tedika, Oasis, and Julius Agbor. 2016. "Does Trust Matter for Entrepreneurship: Evidence from a Cross-Section of Countries" Economies 4, no. 1: 4. https://doi.org/10.3390/economies4010004