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.

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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