Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: During the last decades, enhancing entrepreneurship has emerged as commonly used policy- measure in order to improve economic growth. However, is it true that entrepreneurship unambiguously can be claimed to improve economic growth? This paper intends to review the empirical evidence on the relationship between entrepreneurship on three measures of economic growth, employment, productivity and aggregate economic growth. The review shows that the studies that find no positive relationship between entrepreneurship and productivity growth have studied a relatively short period. Most studies that have studied a longer period (about ten years) provide rather clear evidence on the positive relationship between entrepreneurship and growth. Regarding the relationship between entrepreneurship and employment growth, the empirical evidence to some extent point in different directions. However, it must be concluded that in the long run there seems to be a positive relationship. A majority of the studies on the relationship between entrepreneurship and aggregate economic growth find a positive relationship. Studies that find a negative relationship usually employ non-harmonised self-employment rates as the measure of entrepreneurship.

Keywords: entrepreneurship; economic growth; productivity; employment

JEL-codes: L26; R11

26 pages, September 9, 2008

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