Political Conditions and Economic Organization: Evidence From (in)Formal Entrepreneurship



: Desai Sameeksha, Stenholm Pekka, Webeck Sean, Wuebker Robert

: 2013


Informal entrepreneurship—the formation but not registration of new firms—is by nature difficult to study. This paper contributes to an emerging literature on the subject by exploring the role political conditions play in the incidence of formal and informal entrepreneurship. We exploit variance in political conditions and political shocks across countries to better understand how uncertainty and risk impact entry in the informal and formal sectors. We develop a conceptual model and test our hypotheses on a sample of 62 countries in the time period 2003-2010. Our results highlight a nuanced view of the relationship between political conditions and entrepreneurial activity.



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