SSE/EFI Working Paper Series in Economics and Finance
No 621:
Promoting Entrepreneurship in the Welfare State
Magnus Henrekson ()
and Jesper Roine ()
Abstract: Entrepreneurship is largely ignored or treated in a highly
simplified way in endogenous growth theory. Still, it is now widely
recognized that the supply of entrepreneurial talent is likely to be
important for economic growth, innovation and job creation. In this study
we provide an in-depth examination of how the supply of productive
entrepreneurship is likely to be affected by the kind of tax and welfare
arrangements that may prevail in a mature welfare state. Sweden, allegedly
the most extensive of all welfare states, is the object of the empirical
analysis. It is argued that the Swedish welfare state early on chose a
specific “Swedish Model” of trying to combine ambitious welfare programs
and a high tax burden with good opportunities for economic growth. This
particular view rested heavily on the assumption that innovative activity
was best performed in large established firms and that entry of new firms
was less important. Consequently, policy and institutions were geared to
promoting certain types of activities which could deliver growth if scale
economies are important and intrapreneurship can substitute for
entrepreneurship. However, in an environment where entry, exit and turnover
of firms are important for growth, and where scale-economies are less
important, this kind of model may be more problematic. Both aggregate
economic performance and data on firm growth and direct measures of
entrepreneurial activity are broadly consistent with the identified
structure of payoffs. A number of measures that can be implemented to
strengthen entrepreneurial incentives within extensive welfare states are
discussed, but the fact still remains that an entrepreneurial culture and a
welfare state are very remotely related. As a result, the respective
cultures are unlikely to be promoted by a similar set of institutions.
Keywords: Economic growth; Entrepreneurship; Innovation; Swedish model; Welfare state; (follow links to similar papers)
JEL-Codes: H30; J20; M13; O12; (follow links to similar papers)
42 pages, January 25, 2006
Forthcoming in “The Handbook of Entrepreneurship Policy”, edited by David B Audretsch, Isabel Grilo and Roy Thurik. (To be published by Edward Elgar, 2006).
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- This paper is published as:
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Henrekson, Magnus and Jesper Roine, (2007), 'Promoting Entrepreneurship in the Welfare State' in Audretsch, David B., Isabel Grilo and A. Roy Thurik (eds.) The Handbook of Research on Entrepreneurship Policy, chapter 6, Edward Elgar.
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