Many people have had this thought, none of them have been able to produce strong empirical evidence for it. If this effect were really compelling, America wouldn't have a more dynamic economy than Europe, but it does, despite a pretty bad regulatory and tax architecture.
https://twitter.com/FreyjaErlings/status/1343556054265815042
There were a lot of predictions that Obamacare would goose the rate of entrepreneurship, and the theory is the same: by derisking a startup, it should make it easier to form one. Didn't show up in the numbers: bls.gov/bdm/entreprene…
On the margin might this produce a small effect? Maybe. But there could also be countervailing effects; for example, the higher taxes necessary to pay for a large welfare state might reduce the potential return to entrepreneurship, making people less interested in it.
At any rate, very little evidence that a significant expansion of the welfare state, one particularly accessible to middle class folks who might want to start a business but fear losing insurance for their preexisting condition, helped. Nor do x-country comps look good.
So whatever the reasons for expanding the welfare state, "boost entrepreneurship" lacks either a strong theoretical or empirical basis. Seems totally plausible, but so do many things that aren't true.
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