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High income inequality as a structural factor in entrepreneurial activity

Antonio Lecuna

No xx, Past Working Papers from Universidad del Desarrollo, School of Business and Economics

Abstract: Statistical tests on a panel of data from 54 countries over the 2004–2009 period support the proposition that high income inequality and entrepreneurial activity share a positive linear relationship. In a novel approach, the dependent variable is defined from two independent and uncorrelated perspectives: (1) the World Bank Group Entrepreneurship Snapshot, which measures new business entry density based on secondary official sources; and (2) the Total Early Stage Entrepreneurial Activity of the Global Entrepreneurship Monitor project, which is a survey-based measure of formal and informal entrepreneurial participation rates. The empirical strategy is based on the logic that economies with increasing concentrations of wealth tend to encourage entrepreneurial activity because entrepreneurs accumulate more income than workers. Following the disequalizing model, once this inequality appears, it is reinforced in successive generations. The intuition behind this outcome is that a certain level of initial capital is required to establish a new enterprise, which implies that the probability of becoming an entrepreneur increases if an individual has inherited wealth.

Keywords: Entrepreneurship; income inequality; institutions; public policy. (search for similar items in EconPapers)
JEL-codes: L26 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2014-12, Revised 2014-12
New Economics Papers: this item is included in nep-cse, nep-ent, nep-iue and nep-sbm
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Published in Journal of Technology Management & Innovation, 9(1), 2014, pages 13-26 [DOI: 10.4067/S0718-27242014000100002].

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http://repositorio.udd.cl/bitstream/handle/11447/58/pwp08.pdf?sequence=1 First version, 2007

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