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Entrepreneurship and
Economic Development;
Evidence and Explanations
Mark Sanders
[email protected]
and
Andre van Stel
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Introduction
Setting the Stage
Outlines of the Model
Predictions and Testing
Conclusions
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Setting the Stage
From empirical evidence…
-Kuznets, Schultz, Yamada
-Carlsson, Loveman and Sengenberger, Acs et. al.
-Carree et. al.
…to stylized facts
-A U-shaped relationship between GDP and
entrepreneurship exists in cross-section and
time series data.
-Countries do not experience the through at the same
point in time or level of GDP.
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Setting the Stage
14
12
TH
IN
CL
10
Business ownership rate
MX
NZ
AR
8
US
6
CH
KR
BR
IE
ZA
4
PL
SG
SI
HR
IL
ES
2
UK
SE
IS
NO
SW
AU
IT
HU
CA
DK
DE
FI
NL
BE
FR HK
TW
RU
JP
0
0
5
10
15
20
25
30
35
40
GDP
perCapita
capita 2001 (x1000 PPP per US $)
GDP
per
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Setting the Stage
E
0.20
ITA
0.15
CAN
JAP
Equilibrium
0.10
FRA
US
UK
GER
0.05
0.00
9,000
YCAP
14,000
19,000
24,000
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Setting the Stage
0.12
0.11
FRA
0.10
0.09
US
UK
0.08
0.07
GER
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
0.06
Outlines of the Model
Stage 1:
-
Stage 2:
-
Entrepreneurial R&D
Discovery of new products
High skill intensity and skilled wages
Low (measured) economic growth
Firm based R&D
Improvement on existing products
Low skill intensity and skilled wages
High (measured) economic growth
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Outlines of the Model
Set-Up:
-
standard LOV-preferences
monopolistic competition
rent-seeking drives R&D
2 types of R&D compete for R&D resources
type 1 (entrepreneurial R&D) discovers products
type 2 (firm R&D) develops existing products
all products face life cycle
arbitrage solves R&D allocation in Steady State
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Predictions and Testing
Predictions:
introduction of GPT causes:
shift from firm to entrepreneurial R&D
acceleration in product discovery
higher demand for skilled labour
productivity slowdown
measured slowdown in economic growth
increase in measured entrepreneurial activity
higher start-up and exit rates
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Predictions and Testing
Predictions:
aging of GPT causes:
shift from entrepreneurial to firm R&D
acceleration in product improvements
higher demand for unskilled labour
productivity acceleration
measured acceleration in economic growth
decrease in measured entrepreneurial activity
lower start-up and exit rates
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Predictions and Testing
Predictions:
as GPT’s enter occasionally the observed U-shapes
is just part of a wave that characterizes the
adjustment to technological breakthroughs. Such
waves originate in the technological leader but
spread with the new general purpose technology.
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Predictions and Testing
Preliminary Tests:
The model predicts accurately if:
U-shape in GDP-entrepreneurship is universal
technology leader “leads”
follower countries follow as GPT spreads
U-shape is shorter and more shallow in followers
Start-up and exit rates are both high in early
stage and low towards the end
Relative wages increase early on and decrease
afterwards
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Predictions and Testing
Data Analysis Results:
Patterns in Entrepreneurship confirm ICT was a GPT
The US led that GPT
Most of the OECD followed
Notable exceptions are France, Luxembourg, Norway
and Japan
Data are flawed, analysis preliminary
Results are nonetheless promising
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005
Conclusions
Alternating Innovation regimes may explain:
relative wage fluctuations
productivity slowdown and accelerations
dynamics in entrepreneurial activity
the link between entrepreneurship and growth
With our Model and Analysis:
we
we
we
we
contribute to modeling such alternating regimes
take some first steps in testing the predictions
explain some puzzling stylized facts
underline the role of entrepreneurs in growth
Presentation by Mark Sanders for G-Forum in Jena, Germany
Thursday, November 10th, 2005