1 Introduction
2 The missing link in the endogenous growth models
3 Incumbents, entrepreneurs, and knowledge
3.1 Basic assumptions
3.2 The entrepreneurial choice
4 A simple endogenous growth model with entrepreneurship
Variable notation | Definition |
---|---|
Y
| Final good |
x
j
| Capital good j
|
A
| Aggregate knowledge stock |
K
| Capital stock |
L
| Total population, assumed constant |
L
Y
| Number of people in final good production |
L
E
| Number of entrepreneurs |
L
R
| Number of researchers |
\( \overline{{e_{i} }} \)
| Given entrepreneurial ability of individual i
|
e
i
| Probability that individual i becomes an entrepreneur |
σ
| Efficiency level of economy |
Z
| Production function, new technology |
\( \mathop A\limits^{ \bullet } \)
| Change in aggregate stock of knowledge |
\( \mathop K\limits^{ \bullet } \)
| Change in capital stock |
κ
| Units of capital goods to produce one unit of capital |
ρ
| Subjective discount rate |
θ
| Inverse of intertemporal elasticity of substitution |
4.1 Linking entrepreneurs to knowledge exploitation
4.2 Knowledge production in an economy
4.3 Endogenous growth with knowledge-exploiting entrepreneurs
5 Empirical analysis
5.1 Variables
Growth | Difference in log real GDP, 1995 year’s prices and in purchasing power parity (PPP) | OECD, Statistical Compendium on CD, 2004-2002 |
Entrepreneurs (ENT) | Total nonagriculture self-employed | EIM, The COMPENDIA database. |
Researchers (R&D) | Total number of researchers, full-time equivalent | OECD, Statistical Compendium on CD, 2004-2 |
Trade union density (TUD) | Share of labor force that is unionized | |
Capital stock per worker (CAPW) | Business capital stock divided by employment valued at 1995 price level and in PPP | OECD, Statistical Compendium on CD, 2004-2 |
Openness (OPEN) | The sum of exports and imports of goods and services measured as a share of gross domestic product | OECD, Statistical Compendium on CD, 2004-2 |
Urban population (URBAN) | The share of total population living in areas defined as urban in each country | OECD, Statistical Compendium on CD, 2004-2 |
Average years of schooling (TYR) | Average years of schooling among population aged 25 years and above | Barro and Lee (2000), International Data on Educational Attainment. Updates and Implications, CID Working Paper No. 42 |
Population (POP) | Total population | OECD, Statistical Compendium on CD, 2004-2 |
5.2 Econometric specification
5.3 Regression results
GLS, common AR1 | GLS, panel-specific AR1 | OLS | ||||
---|---|---|---|---|---|---|
Level | Share | Level | Share | Level | Share | |
Self-employed, 1,000 | 1.10*** (3.88) | 1.10*** (3.88) | 1.15*** (6.85) | 1.15*** (6.87) | 1.21** (2.12) | 1.20** (2.11) |
Researchers, 1,000 | 0.18 (0.88) | 0.18 (0.88) | −0.14 (−0.11) | −0.02 (−0.12) | 0.12 (0.45) | 0.13 (0.44) |
Population | −1.40*** (−3.65) | −0.12* (−1.63) | −1.31*** (−5.95) | −0.17*** (−3.81) | −1.15** (−2.06) | −0.23* (−1.89) |
Time dummy, Period 2 | 1.11*** (7.77) | 1.11*** (7.77) | 1.27*** (18.76) | 1.27*** (19.01) | 1.12*** (2.87) | 1.13*** (2.87) |
Time dummy, Period 3 | −0.49*** (−3.20) | −0.49*** (−3.20) | −0.22** (−2.25) | −0.23** (−2.28) | −0.34 (−0.82) | −0.34 (−0.81) |
Time dummy, Period 4 | 0.48*** (2.88) | 0.48*** (2.87) | −0.72*** (−0.03) | 0.72*** (5.03) | 0.63 (1.40) | 0.63 (1.41) |
Constant | 7.80*** (3.85) | 1.99* (1.89) | 7.20*** (5.62) | 1.95*** (2.88) | 8.97** (2.48) | 2.84** (2.03) |
Wald | 181*** | 181*** | 1329*** | 1432*** | – | – |
F | – | – | – | – | 4.12 | 4.11 |
Adj.\( R^{2} \)
| – | – | – | – | 0.20 | 0.20 |
No. of obs. | 74 | 74 | 74 | 74 | 74 | 74 |
Specific AR, 5-year average | Common AR, 5-year average | OLS | ||||
---|---|---|---|---|---|---|
Level | Share | Level | Share | Level | Share | |
Self-employed, 1,000 | 1.35*** (5.15) | 1.36*** (5.17) | 1.23*** (2.90) | 1.23*** (2.89) | 1.51** (2.59) | 1.51** (2.59) |
Researchers, 1,000 | −0.34 (−1.31) | −0.34 (−1.31) | 0.26 (0.65) | 0.26 (0.65) | 0.24 (0.48) | 0.24 (0.47) |
Trade union density, % | −0.09 (−0.49) | −0.09 (−0.49) | −0.20 (−0.82) | −0.20 (−0.82) | −0.31 (−0.78) | −0.31 (−0.78) |
Population | −0.95** (−2.13) | 0.06 (0.45) | −1.47** (−2.03) | 0.02 (0.12) | −1.80* (−1.90) | −0.04 (−0.19) |
Capital stock per worker, 1,000 USD | −0.85* (−1.93) | −0.85* (−1.92) | −1.41** (−2.35) | −1.42** (−2.35) | −1.51** (−2.23) | −1.51** (−2.23) |
Openness, % | 0.42 (1.27) | 0.42 (1.29) | 0.73* (1.71) | 0.73* (1.71) | 1.10** (2.53) | 1.11** (2.53) |
Average years of schooling | 1.25** (2.37) | 1.26** (2.40) | 0.60 (0.64) | 0.59 (0.63) | 0.51 (0.43) | 0.51 (0.43) |
Urban population, % | −1.81*** (−3.41) | −1.83*** (−3.44) | −1.48* (−1.66) | −1.48* (−1.65) | −3.46*** (−3.53) | −3.46*** (−3.53) |
Time dummy, Period 2 | 1.27*** (9.97) | 1.27*** (9.93) | 1.09*** (4.71) | 1.09*** (4.71) | 0.89** (2.30) | 0.89** (2.30) |
Time dummy, Period 3 | −0.04 (−0.18) | −0.04 (−0.20) | −0.33 (−1.02) | −0.33 (−1.02) | −0.40 (−0.85) | −0.40 (−0.85) |
Time dummy, Period 4 | 0.84*** (2.71) | 0.84*** (2.69) | 0.50 (1.05) | 0.47 (1.05) | 0.40 (0.61) | 0.38 (0.61) |
Constant | 10.95** (2.41) | 6.28** (1.87) | 16.33** (2.43) | 9.49** (1.97) | 26.01*** (3.34) | 17.95*** (3.05) |
Wald | 1357*** | 1359*** | 99*** | 99*** | – | – |
F
| – | – | – | – | 4.44 | 4.43 |
Adj. \( R^{2} \)
| – | – | – | – | 0.35 | 0.35 |
No. of obs. | 70 | 70 | 70 | 70 | 70 | 70 |
GLS, common AR1 | GLS, panel-specific AR1 | OLS | ||||
---|---|---|---|---|---|---|
Levels | Shares | Levels | Shares | Levels | Shares | |
Self-employed, 1,000 | 0.69 (1.31) | 0.70 (1.31) | 1.29*** (3.16) | 1.29*** (3.16) | 1.45*** (3.67) | 1.44*** (3.67) |
Researchers, 1,000 | 0.28 (1.10) | 0.28 (1.10) | 0.22 (0.74) | 0.22 (0.74) | 0.15 (0.71) | 0.16 (0.71) |
Population | −1.09 (−1.53) | −0.11 (−0.92) | −1.51 (−2.80) | −0.01 (−0.03) | −1.90*** (−3.68) | −0.30*** (−3.64) |
Annual dummies | Yes | Yes | Yes | Yes | Yes | Yes |
Constant | 5.62* (1.68) | 1.11 (0.94) | 6.08** (2.17) | −0.87 (−0.67) | 9.52*** (3.79) | 2.16** (2.13) |
Wald | 242*** | 242*** | 292*** | 293*** | – | – |
F
| – | – | – | – | 6.82 | 6.82 |
Adj. \( R^{2} \)
| – | – | – | – | 0.27 | 0.27 |
No. of obs. | 371 | 371 | 371 | 371 | 371 | 371 |
Specific AR | Common AR | OLS | ||||
---|---|---|---|---|---|---|
Level | Share | Level | Share | Level | Share | |
Self-employed, 1,000 | 1.24*** (2.65) | 1.24*** (2.65) | 1.16** (2.02) | 1.16** (2.02) | 1.72*** (4.28) | 1.73*** (4.28) |
Researchers, 1,000 | 0.25 (0.55) | 0.25 (0.55) | 0.24 (0.58) | 0.25 (0.58) | 0.41 (1.16) | 0.40 (1.15) |
Trade union density, % | −0.26 (−0.84) | −0.26 (−0.84) | −0.18 (−0.59) | −0.18 (−0.59) | −0.40 (−1.44) | −0.40 (−1.44) |
Population | −1.48* (−1.77) | 0.10 (0.54) | −1.42* (−1.61) | −0.02 (−0.05) | −2.23*** (−3.45) | −0.09 (−0.56) |
Capital stock per worker, 1,000 USD | −1.60** (−2.48) | −1.60** (−2.48) | −2.06*** (−3.29) | −2.06*** (−3.29) | −1.65*** (−3.60) | −1.65*** (−3.61) |
Openness, % | 0.93** (2.13) | 0.94** (2.13) | 1.01** (2.28) | 1.01** (2.28) | 1.31*** (4.28) | 1.31*** (4.28) |
Average years of schooling | 0.77 (0.75) | 0.77 (0.75) | 0.04 (0.03) | 0.04 (0.04) | 0.39 (0.45) | 0.39 (0.45) |
Urban population, % | −1.95* (−1.91) | −1.95* (−1.91) | −2.08 (−2.28)** | −2.08** (−2.28) | −3.73*** (−5.48) | −3.73*** (−5.48) |
Annual dummies | Yes | Yes | Yes | Yes | Yes | Yes |
Constant | 17.00** (2.23) | 10.10* (1.88) | 20.36*** (2.86) | 13.87*** (2.66) | 28.69*** (5.36) | 18.86*** (4.66) |
Wald | 310*** | 310*** | 292*** | 291*** | – | – |
F-test | – | – | – | 8.65 | 8.65 | |
Adj. \( R^{2} \)
| – | – | – | 0.38 | 0.38 | |
No. of obs. | 371 | 371 | 371 | 371 | 371 | 371 |
Specific AR | Common AR | OLS | ||||
---|---|---|---|---|---|---|
1981–1993 | 1994–2002 | 1981–1993 | 1994–2002 | 1981–1993 | 1994–2002 | |
Self-employed, 1,000 | 1.09* (1.73) | 1.66*** (2.89) | 1.27* (1.70) | 1.81*** (2.77) | 1.03* (1.79) | 2.16*** (3.97) |
Researchers, 1,000 | 0.06 (0.11) | −0.85 (−1.50) | −0.10 (−0.16) | −71 (−0.99) | 0.01 (0.01) | −1.03 (−1.48) |
Trade union density, % | −0.25 (−0.58) | −1.05** (−2.30) | −0.29 (−0.79) | −0.86** (−2.10) | −0.25 (−0.65) | −1.12*** (−2.78) |
Population | −1.08 (−1.02) | −1.55* (−1.81) | −0.99 (−0.91) | −1.92* (−1.76) | −0.90 (−1.03) | −2.08* (−2.01) |
Capital stock per worker, 1,000 USD | −1.71** (−1.98) | 0.44 (0.46) | −2.02** (−2.37) | −0.18 (−0.21) | −1.64*** (−2.58) | 0.08 (0.11) |
Openness, % | 0.72 (1.30) | 0.57 (1.22) | 0.88 (1.49) | −0.04 (−0.08) | 0.75* (1.70) | 1.03** (2.27) |
Average years of schooling | 0.79 (0.68) | 6.89*** (3.07) | 1.04 (0.75) | 4.28** (2.07) | 0.37 (0.37) | 5.66*** (3.02) |
Urban population, % | −2.70*** (−2.45) | −3.25*** (−3.11) | −2.30** (−2.11) | −1.38 (−1.18) | −2.74*** (−2.93) | −4.64*** (−5.17) |
Annual dummies | Yes | Yes | Yes | Yes | Yes | Yes |
Constant | 19.06** (2.07) | 9.12 (1.05) | 16.24* (1.80) | 13.14 (1.30) | 18.80*** (2.61) | 19.24** (2.19) |
Wald | 159*** | 203*** | 173*** | 154*** | − | − |
F-test | – | – | – | – | 6.31 | 10.96 |
Adj.\( R^{2} \)
| – | – | – | – | 0.33 | 0.52 |
No. of obs. | 221 | 150 | 221 | 150 | 221 | 150 |
5.4 Testing for robustness
Regression | Variable | SpecificAR1 | OLS |
---|---|---|---|
1 | Self-employed lagged 1 period | 0.93** (1.98) | 1.51*** (3.70) |
Researchers | 0.20 (0.43) | 0.36 (1.02) | |
2 | Self-employed | 0.98* (1.93) | 1.57*** (3.78) |
Researchers lagged 1 period | 0.23 (0.46) | 0.29 (0.78) | |
3 | Self-employed lagged 1 period | 0.60 (1.17) | 1.35*** (3.22) |
Researchers lagged 1 period | 0.16 (0.33) | 0.24 (0.64) | |
4 | Self-employed lagged 4 periods | 1.11** (2.27) | 1.37*** (3.27) |
Researchers | 0.23 (0.51) | 0.30 (0.84) | |
5 | Self-employed | 1.13* (1.95) | 1.49*** (3.38) |
Researchers lagged 4 periods | −0.70 (−1.24) | −0.23 (−0.56) | |
6 | Self−employed lagged 4 periods | 1.30** (2.15) | 1.33*** (2.97) |
Researchers lagged 4 periods | −0.79 (−1.44) | −0.39 (−0.94) |
Specific AR, annual data | Common AR, 5-year average | |||
---|---|---|---|---|
Level | Share | Level | Share | |
Self-employed, 1,000 | 1.18** (2.53) | 1.18** (2.53) | 1.21*** (2.82) | 1.20*** (2.82) |
Researchers, 1,000 | 0.43 (1.20) | 0.43 (1.19) | 0.41 (1.28) | 0.41 (1.28) |
Population | −1.61** (−2.00) | 0.002 (0.01) | −1.61** (−2.35) | 0.006 (0.004) |
Trade union density, % | −0.23 (−0.75) | −0.23 (−0.74) | −0.18 (−0.75) | −0.18 (−0.75) |
Capital stock per worker, 1,000 USD | −1.79*** (−2.97) | −1.79*** (−2.97) | −1.59*** (−2.89) | −1.59*** (−2.89) |
Openness, % | 0.94** (2.14) | 0.94** (2.14) | 0.77* (1.80) | 0.77* (1.79) |
Average years of schooling | − | − | − | − |
Urban population, % | −1.77* (−1.78) | −1.77* (−1.78) | −1.41 (−1.58) | −1.41 (−1.58) |
Time dummy, period 2 | – | – | 1.10*** (4.78) | 1.10*** (4.78) |
Time dummy, period 3 | – | – | −0.29 (−0.91) | −0.29 (−0.91) |
Time dummy, period 4 | – | – | 0.52 (1.18) | 0.52 (1.18) |
Annual dummies | Yes | Yes | – | – |
Constant | 19.58*** (2.93) | 12.16*** (2.58) | 18.85*** (3.46) | 11.42*** (2.99) |
Wald | 308*** | 308*** | 100*** | 100*** |
No. of obs. | 371 | 371 | 70 | 70 |