The robustness of trust, institutions and entrepreneurship regressions, revisited

ABSTRACT

Several studies have shown the importance of trust and economic institutions to entrepreneurship. How trust works through institutions is still unknown. We examine the joint effect trust and institutions have on entrepreneurship and complement the regressions with three sophisticated robustness tests. We find trust and legal system/property rights to be complement and trust and access to sound money substitutes to each other. Trust’s effects on entrepreneurship are quite dependent on the sample data and model specifications. The results should lead to a re-evaluation of the relationship between trust, institutions and entrepreneurship.

KEYWORDS:

• Economic freedom of the world index
• entrepreneurship
• robustness tests
• sensitivity analysis
• total early-stage entrepreneurial activity

JEL CLASSIFICATION:

• C8
• D2
• H1
• M2
• O5

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ Total Early-stage Entrepreneurial Activity (TEA) is made of two components. The nascent entrepreneurship rate is defined as the number of people that are actively involved in starting a new venture, as a percentage of adult population (18–64 years old). The business ownership rate includes adults who are currently an owner-manager of an established business, i.e., owning and managing a running business that has paid salaries, wages, or any other payments to the owners for more than 42 months.