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on Entrepreneurship |
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Issue of 2013‒09‒28
five papers chosen by Marcus Dejardin University of Namur and Universite' Catholique de Louvain |
| By: | Doepke, Matthias; Zilibotti, Fabrizio |
| Abstract: | We discuss the two-way link between culture and economic growth. We present a model of endogenous technical change where growth is driven by the innovative activity of entrepreneurs. Entrepreneurship is risky and requires investments that affect the steepness of the lifetime consumption profile. As a consequence, the occupational choice of entrepreneurship hinges on risk tolerance and patience. Parents expecting their children to become entrepreneurs have an incentive to instill these two values in their children. Cultural transmission is Beckerian, i.e., parents are driven by the desire to maximize their children's happiness. We also consider, in an extension, a paternalistic motive for preference transmission. The growth rate of the economy depends on the fraction of the population choosing an entrepreneurial career. How many entrepreneurs there are in a society hinges, in turn, on parental investments in children's patience and risk tolerance. There can be multiple balanced-growth paths, where in faster-growing countries more people exhibit an "entrepreneurial spirit". We discuss applications of models of endogenous preferences to the analysis of socio-economic transformations, such as the British Industrial Revolution. We also discuss empirical studies documenting the importance of culture and preference heterogeneity for economic growth. |
| Keywords: | culture; economic growth; endogenous preferences; entrepreneurship; innovation; preference transmission |
| JEL: | J20 O10 O40 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9516&r=ent |
| By: | Marco Bassetto; Marco Cagetti; Mariacristina De Nardi |
| Abstract: | We study the effects of credit shocks in a model with heterogeneous entrepreneurs, financing constraints, and a realistic firm size distribution. As entrepreneurial firms can grow only slowly and rely heavily on retained earnings to expand the size of their business in this set-up, we show that, by reducing entrepreneurial firm size and earnings, negative shocks have a very persistent effect on real activity. In determining the speed of recovery from an adverse economic shock, the most important factor is the extent to which the shock erodes entrepreneurial wealth. |
| JEL: | E2 E21 E23 E6 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19296&r=ent |
| By: | Morgan, Horatio M. |
| Abstract: | Although the size of the informal economy is relatively large across Latin America and the Caribbean, it is not completely understood how deficiencies in the institutional environment may be related either to the propensity for entrepreneurship or the performance of entrepreneurs in the informal economy. Focusing on institutional heterogeneity, this paper characterizes external finance (i.e. local family-based equity, remittances, bank credit, business angel finance and venture capital) in terms of (1) the mix of finance, business consulting and contacts, (2) governance mechanisms (i.e. reputational capital versus formal contracts) and (3) fungibility (i.e. discretion to use funds borrowed or received for alternative purposes); and develop a number of propositions. The outcome is a finance-performance nexus that provides a basis for a theoretically grounded empirical investigation of the relationship between the financial aspects of the institutional environment and both the propensity for entrepreneurship and the performance of entrepreneurs in the informal economy. |
| Keywords: | Bank Credit; Entrepreneurship; Family-based Equity; Informal Economy; Latin America and the Caribbean; Remittances. |
| JEL: | G21 L26 M13 O17 O43 |
| Date: | 2013–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49856&r=ent |
| By: | McKenzie, David J.; Woodruff, Christopher |
| Abstract: | Business training programs are a popular policy option to try to improve the performance of enterprises around the world. The last few years have seen rapid growth in the number of evaluations of these programs in developing countries. We undertake a critical review of these studies with the goal of synthesizing the emerging lessons and understanding the limitations of the existing research and the areas in which more work is needed. We find that there is substantial heterogeneity in the length, content, and types of firms participating in the training programs evaluated. Many evaluations suffer from low statistical power, measure impacts only within a year of training, and experience problems with survey attrition and measurement of firm profits and revenues. Over these short time horizons, there are relatively modest impacts of training on survivorship of existing firms, but stronger evidence that training programs help prospective owners launch new businesses more quickly. Most studies find that existing firm owners implement some of the practices taught in training, but the magnitudes of these improvements in practices are often relatively modest. Few studies find significant impacts on profits or sales, although a couple of the studies with more statistical power have done so. Some studies have also found benefits to microfinance organizations of offering training. To date there is little evidence to help guide policymakers as to whether any impacts found come from trained firms competing away sales from other businesses versus through productivity improvements, and little evidence to guide the development of the provision of training at market prices. We conclude by summarizing some directions and key questions for future studies. |
| Keywords: | business training; consulting; firm productivity; randomized experiments |
| JEL: | J16 L26 M53 O12 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9564&r=ent |
| By: | Ayyagari, Meghana; Beck, Thorsten; Hoseini, Mohammad |
| Abstract: | Using state-level data from India over the period 1983 to 2005, this paper gauges the effect of financial deepening and outreach on rural poverty. Following the 1991 liberalization episode, we find a strong negative relationship between financial deepening, rather than financial breadth, and rural poverty. Instrumental variable regressions suggest that this relationship is robust to omitted variable and endogeneity biases. We also find that financial deepening has reduced poverty rates especially among self-employed in the rural areas, while at the same time it supported an inter-state migration trend from rural areas into the tertiary sector in urban areas, consistent with financial deepening being driven by credit to the tertiary sector. This suggests that financial deepening contributed to poverty alleviation in rural areas by fostering entrepreneurship and inducing geographic-sectoral migration. |
| Keywords: | Economic development; Entrepreneurship; Financial liberalization; India; Migration; Poverty alleviation |
| JEL: | G21 G28 O15 O16 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9497&r=ent |