Equilibrium entrepreneurship rate, economic development and growth. Evidence from Spanish regions

José A. Belso Martínez

Entrepreneurship & Regional Development, 2005, vol. 17, issue 2, 145-161

Abstract: Over the last few years the entrepreneurship phenomenon has become a frequent target for policymakers and economic researchers. Recently, a series of studies has identified the contribution of entrepreneurship to unemployment reduction and economic growth. At the same time, some researchers point out the increasing relevance of small and medium businesses in the developed economies. The aim of the study is to analyse the evolution of the entrepreneurship equilibrium rate as an economy reaches higher levels of development, to investigate how the entrepreneurship rate responds in contexts of imbalance, and how these imbalances affect economic growth. After a series of hypotheses, we have built up a model of two equations with provincial data for the period 1998--2002. From this model, we have verified the following evidence: the relationship between the level of development and the entrepreneurship equilibrium rate initially decreases and later increases, the existence of an automatic fit mechanism in situations of imbalance in the entrepreneurship rate, a penalization of economic growth for any deviation from the equilibrium rate and heterogeneous behaviour of the entrepreneurship rate in different Spanish regions.

Date: 2005
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DOI: 10.1080/08985620500032633

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