What is the "growth penalty" when a country's entrepreneurship deviates from its optimal level? We use data on entrepreneurship for a panel of developed and developing countries over 2003-2011 to estimate growth equations. We treat the impact of entrepreneurship on real GDP growth as heterogeneous across countries. The methodology accounts for unobserved heterogeneity among countries in the optimal entrepreneurship rate and other factors affecting growth. In less developed countries, there is not enough entrepreneurship, and increases in the entrepreneurship rate have a sizeable positive effect on growth. In high income countries, entrepreneurship appears to be close to the optimum. We also explore how the growth penalty varies across countries. Higher levels of R&D capability decrease the growth penalty of having too few entrepreneurs, suggesting that R&D and entrepreneurship are substitutes. Corruption increases the opportunity cost of having a suboptimal entrepreneurship level, a finding that is in accord with the hypothesis that corruption can "grease the wheels" of commerce by speeding up bureaucratic processes. Countries with greater entrepreneurial capability suffer a higher growth penalty: the higher the ability of the marginal entrepreneur, the higher is the opportunity cost to the economy of not taking advantage of her talents.

This paper uses panel Granger causality tests to study the relationship between sector specific FDI and CO 2 emissions. Using a sample of 18 Latin American countries for the 1980-2007 period, we find causality running from FDI in polluting intensive industries ("the dirty sector") to CO 2 emissions per capita. This result is robust to controlling for other factors associated with CO 2 emissions and using the ratio of CO 2 emissions to GDP. For other sectors, we find no robust evidence that FDI causes CO 2 emissions.

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This paper examines the impact of crime and insecurity on support for and satisfaction with democracy and trust in institutions. We use survey data from the Latin American Public Opinion Project (LAPOP) for Colombia during the 2004-2010 period. We find that perceptions of insecurity, crime victimization, being asked for a bribe and being affected by the armed conflict have a negative significant effect on satisfaction with democracy and trust in public institutions. Our findings show an important indirect channel through which crime can hinder development because distrust in institutions is associated with lower levels of social capital.