Does Entrepreneurship Reduce Unemployment?
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|
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 http://hdl.handle.net/1765/6857