Entrepreneurship and the Business Cycle

We study the cyclical pattern of entrepreneurial activity. Results across 22 OECD countries for the period 1972-2007 show that entrepreneurial activity is a leading indicator of the business cycle in a Granger-causality sense. This contradicts existing theoretical hypotheses which predict that entrepreneurship is pro-cyclical or not cyclical. We discuss the causes and implications of this finding which have immense policy relevance during the second economic crisis of the 21st century.