Economic freedom as a catalyst for entrepreneurship: an empirical analysis of GCC countries

Abstract

AbstractThis research aims to investigate the impact of economic freedom on entrepreneurship within the GCC countries, spanning the period 2006–2020. Using the Panel ARDL methodology, the research analyzes the impact of economic freedom and its diverse components, including Property Rights, Government Integrity, Tax Burden, Government Spending, Business Freedom, Investment Freedom and Monetary Freedom on entrepreneurship rates, measured by new business density (REE). Additionally, critical control variables like GDP growth, inflation, unemployment and political stability were woven into the analysis. The findings highlight that while economic freedom is a consistent long-term catalyst for entrepreneurship, the short-term dynamics are influenced by many factors, with notable implications for GDP growth and political stability. Further dissection revealed that specific components of economic freedom, such as Tax Burden and Government Spending, held pronounced significance in shaping entrepreneurial inclinations. This research offers policymakers a nuanced understanding of how economic freedom, with its diverse components, shapes the entrepreneurial landscape in the GCC region, underscoring the importance of policies that factor in regional specificities. This research, also offers a detailed examination of individual economic freedom elements and their influence on entrepreneurial activity. This approach allows for providing a fresh perspective and contributing significantly to the existing literature.

Keywords

• Economic freedom
• entrepreneurship
• macroeconomic indicators
• political stability
• Gulf Cooperation Council (GCC)
• panel ARDL