Transformative and Subsistence Entrepreneurs: Origins and Impacts on Economic Growth

Ufuk Akcigit, Harun Alp, Jeremy Pearce and Marta Prato

No 1166, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper studies how individuals sort into entrepreneurship and invention-related occupations and how their interactions shape innovation and economic growth. We develop an endogenous growth model in which occupational sorting jointly determines the supply of R&D talent and entrepreneurs’ demand for it. Empirically, using Danish microdata, we show that transformative entrepreneurs—those who hire R&D workers—tend to have higher IQ and education and build faster-growing firms than other entrepreneurs. Quantitatively, the estimated model indicates that financial barriers to education misallocate talent; alleviating them through education subsidies increases both demand and supply of R&D workers, raising innovation and long-run growth. Broad startup subsidies are ineffective.

Keywords: entrepreneurship; R&D Policy; innovation; IQ; endogenous growth (search for similar items in EconPapers)
JEL-codes: J24 O31 O38 O47 (search for similar items in EconPapers)
Pages: 65
Date: 2025-09-01
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Related works:
Working Paper: Transformative and Subsistence Entrepreneurs: Origins and Impacts on Economic Growth (2025)
Working Paper: Transformative and Subsistence Entrepreneurs: Origins and Impacts on Economic Growth (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:101780

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DOI: 10.59576/sr.1166

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