Economic Policy Uncertainty and Entrepreneurship: A Bad for a Good?

Abstract

The study examines the influences of the global/domestic economic policy uncertainty (EPU) on entrepreneurship in a sample of 23 economies over the period 2006-2016. Employing the two-step system general method of moment (GMM) estimation for unbalanced panel data, our study provides surprising evidence indicating that EPU may not always be harmful to entrepreneurship. Precisely, in contrast with existing literature emphasizing the negative impact of the uncertainty on entrepreneurship, our article suggests that EPU seems to boost pro-entrepreneurial social and cultural norms (i.e., encouraging actions for creation of new businesses). As such, we suggest that uncertainty may serve as an exogenous shock filtering "good" business ventures from "not-so-good" ones.