Green Policies for the Circular Economy and Entrepreneurship: International Evidence

By exploiting the panel data of 100 countries over the period 2006 to 2022, I show how climate change policies and green growth within a circular economy affect entrepreneurship. Higher energy intensity predicts a lower rate of new firm creation. In contrast, higher green growth correlates with a higher number of new businesses. The interaction between energy intensity and green growth indicates that environmental support can partially offset the adverse effects of energy-intensive economic structures. Using genetic distance to the United Kingdom as an instrumental variable, I establish a causal relationship. In particular, the findings suggest that well-designed environmental policies can act as a catalyst for new firm formation, especially in circular economies facing structural and developmental constraints.