Government interventions in market economies can impact heavily on both the welfare of entrepreneurs and the size of the entrepreneurship sector. Government intervention is often motivated by a belief that entrepreneurs generate important positive social and economic externalities, such as new ideas, new products, new employment and enhanced competitiveness. If entrepreneurs are unable to appropriate all of these benefits themselves, there may be too little private investment for the social good, making a case for government intervention.

Many governments also see entrepreneurship as a route out of poverty and dependence on state benefits, and as a means of achieving selfreliance. At the same time, though, governments often evince concern about the living and working conditions of the poorest and most vulnerable workers, who are often found in entrepreneurship, either as selfemployed business owners or as employees of the self-employed.

In most developed economies, the main channels of government intervention are through the credit market, the tax system and expenditure on assistance and advice. Government regulation can also affect the performance of entrepreneurial ventures. This chapter provides an overview of both the theory and evidence relating to government intervention in these areas.

The chapter is organised as follows. Section 10.1 describes and analyses government interventions in the credit market. Sections 10.2 and 10.3 develop the theory of taxation and entrepreneurship, with regard to the income tax system and tax evasion and avoidance.