Globalization and Informal Entrepreneurship: A Cross-Country Analysis

This paper provides a comprehensive empirical analysis on the relationship between globalization and informal entrepreneurship. The impact of globalization on informal entrepreneurship was analyzed using cross-country data. Using ordinary least squares and instrumental variables techniques, the results showed that globalization reduces informal entrepreneurship. This finding was robust to various sensitivity analyses including an alternate measure of globalization, an alternate measure of informal entrepreneurship, controlling for additional covariates, accounting for endogeneity of globalization, correcting for outliers, and considering nonlinearities. Furthermore, employing quantile regression analysis, the results suggested that globalization was most effective when informal entrepreneurship was most prevalent. Consequently, nations would benefit with regard to less underground entrepreneurship from policies that promote globalization through such things as removing barriers to trade, improving the transmission of information and promoting involvement in international organizations.