Macroeconomic and Structural Determinants of Formal Business Entry in ASEAN: Evidence from a Linear Mixed-Effects Model Using World Development Indicators

Abstract

This study examines the macroeconomic and structural determinants of formal entrepreneurial entry in ASEAN using new business density (new limited liability company registrations per 1,000 working-age people) as the dependent variable. Annual panel data were drawn from the World Development Indicators (WDI) and organized into an unbalanced country–year dataset. To account for repeated observations and persistent cross-country differences in baseline business entry, the study employed a linear mixed-effects model with a random intercept for country and fixed effects for population density, domestic credit to the private sector by banks (% of GDP), GDP per capita (constant 2015 US$), tertiary enrollment (% gross), inflation, unemployment (modeled ILO estimate), internet usage, and year. The fitted model used 95 country–year observations across 9 ASEAN country groups. Random-effects estimates indicate substantial between-country heterogeneity in formal entry (ICC = 0.346), supporting the appropriateness of a mixed-model framework. Fixed-effects results show that population density, domestic credit to the private sector by banks, and GDP per capita are positively and significantly associated with new business density, while tertiary enrollment exhibits a significant negative association. By contrast, year, inflation, internet usage, and unemployment are not statistically significant in the estimated specification. Overall, the findings suggest that formal business entry in the observed ASEAN panel is more strongly associated with structural factors—development level, banking-sector credit depth, and population concentration—than with short-run macroeconomic conditions.