The relationship between unemployment and entrepreneurship has been shrouded with ambiguity. There is assumed to be a two-way causation between changes in the level of entrepreneurship and that of unemployment-- a "Schumpeter" effect of entrepreneurship reducing unemployment and a "refugee" or "shopkeeper" effect of unemployment stimulating entrepreneurship. The purpose of this paper is to try to reconcile the ambiguities found in the relationship between unemployment and entrepreneurship. We do this by introducing a two equation model where changes in unemployment and in the number of business owners are linked to subsequent changes in those variables for a panel of 23 OECD countries over the period 1974-1998. The existence of two distinct and separate relationships between unemployment and entrepreneurship is identified including significant "Schumpeter" and "refugee" effects.

Gibrat's Law, economic development, entrepreneurship, unemployment
Production, Pricing, and Market Structure; Size Distribution of Firms (jel L11), New Firms; Startups (jel M13), Macroeconomic Analyses of Economic Development (jel O11)
Tinbergen Institute Discussion Paper Series
Tinbergen Institute

Audretsch, D.B, Carree, M.A, & Thurik, A.R. (2001). Does Entrepreneurship Reduce Unemployment? (No. TI 01-074/3). Tinbergen Institute Discussion Paper Series. Retrieved from