In the present paper we address the relationship between the extent of business ownership (self-employment) and economic development. We will focus upon three issues. First, how is the equilibrium rate of business ownership related to the stage of economic development? Second, what is the speed of convergence towards the equilibrium rate when the rate of business ownership is out-of-equilibrium? Third, to what extent does deviating from the equilibrium rate of business ownership lead to less economic growth? Hypotheses concerning all three issues are formulated setting up a new two-equation model. We find confirmation for the hypothesised effects using a data panel of 23 OECD countries. An important policy implication of our exercises is that low barriers to entry and exit of self-employed/businesses are necessary conditions for the equilibrium seeking mechanisms that are vital for a sound economic development.

business ownership, economic growth, entrepreneurship
Industrial Organization and Macroeconomics; Industrial Structure and Structural Change; Industrial Price Indices (jel L16), Microeconomic Analyses of Economic Development (jel O12)
hdl.handle.net/1765/7701
Tinbergen Institute Discussion Paper Series
Tinbergen Institute

Carree, M.A, van Stel, A.J, Thurik, A.R, & Wennekers, A.R.M. (2000). Business Ownership and Economic Growth in 23 OECD Countries (No. TI 00-001/3). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/7701