FIRES Policy Briefs


We argue that institutional changes in a liberalizing direction are a sine qua non for economies
of the European Union to become more entrepreneurial in order to promote innovation
and economic growth. However, this does not mean that one-size-fits-all policy
reforms towards freer markets are likely to be successful. An important reason is that the
28 union member states have very different histories, and distinct institutional structures,
affecting their efficiency and the viability of reforming them. These differences imply that
the same policy reform may yield very different results in different countries, ranging from
the good to the bad to the ugly. We therefore formulate a reform strategy that takes country
differences into account without abandoning the long-term goal of institutional liberalization
in order to promote entrepreneurship, innovation and growth. The proposed strategy
concerns reforms with respect to (i) the rule of law and the protection of property
rights, (ii) the tax system, (iii) regulations governing savings, capital and finance, (iv) the
organization of labor markets and social insurance systems, (v) regulation of goods and
service markets, (vi) bankruptcy and insolvency regulation, (vii) R&D, commercialization
and knowledge spillovers, (viii) human capital investments, and (ix) informal institutions.



Labour mobility is an important condition for entrepreneurship. Present policies call for deregulation of the labour market institutions as the preferred mechanism to stimulate entrepreneurship. However, in Deliverable 2.5 we argue that an a-historical one-size-fits-all approach is likely to be misguided in the much more diverse European setting compared to a country like the United States.