Entrepreneurship and economic growth in a panel of countries

Norbert Berthold and Klaus Gründler

No 118, Discussion Paper Series from Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy

Abstract: We study the effect of entrepreneurship on economic growth. First, we illustrate that entrepreneurship affects the investment decision in horizontal and vertical innovations within endogenous growth models. As a direct consequence, the level of entrepreneurship exerts significant growth stimuli. We then evaluate this prediction empirically applying 3SLS estimations based on the approach proposed by Barro (1991, 2000, 2003). Using data of 188 countries between 1980-2010, we show that entrepreneurship has a significantly positive effect on growth, even when controlling for a wide range of commonly used political and state variables suggested by the standard growth model. Our sensitivity analysis that takes into account different proxies of entrepreneurship supports our results. It turns out that the level of uncertainty avoidance - perhaps the purest proxy of entrepreneurship - excerts negative effects on economic growth. The extent of entrepreneurship can thus be considered an adequate additional determinant in growth models to explain differences in per capita income.

Keywords: Entrepreneurship; Economic Growth (search for similar items in EconPapers)
JEL-codes: L26 O31 O47 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ent and nep-fdg
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wuewwb:118

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