The retreat of the state from entrepreneurial activities: A convergence analysis for OECD countries, 1980-2007

•Empirical analysis of retreat of the state from entrepreneurial activities•Uses three-dimensional concept (privatization, cutback of subsidies, regulation)•Uses new privatization databank (REST)•Investigates sigma and (conditional) beta convergence•Finds only weak evidence for convergence

In this paper, we measure the extent and dissemination of the retreat of the state from entrepreneurial activities in 20 OECD countries during the 1980-2007 period using a three-dimensional concept and a new dataset, the REST database. We consider privatization, deregulation in network-based services, and the cutback of subsidies. Though the empirical analysis confirms a clear trend towards diminishing state influence in all three dimensions, the analysis of both sigma and conditional beta convergence indicates convergence only for privatization (measured by public employment) and for subsidization, indicating that OECD countries have become similar and have converged to a common equilibrium with respect to these dimensions.