nep-ent New Economics Papers
on Entrepreneurship
Issue of 2023‒11‒13
eleven papers chosen by
Marcus Dejardin, Université de Namur

  1. Are Senior Entrepreneurs Happier than Who? The Role of Income and Health By Fritsch, Michael; Sorgner, Alina; Wyrwich, Michael
  2. Unintended Consequences of Youth Entrepreneurship Programs: Experimental Evidence from Rwanda By Blimpo, Moussa; Pugatch, Todd
  3. Mind the Knowledge Gap! The Origins of Declining Business Dynamics in a Macro Agent-Based Model By Domenico Delli Gatti; Roberta Terranova; Enrico Maria Turco
  4. Are immigrants particularly entrepreneurial? Policy lessons from a selective immigration system By Green, David A.; Liu, Huju; Ostrovsky, Yuri; Picot, Garnett
  5. There are different shades of green: heterogeneous environmental innovations and their effects on firm performance By Gianluca Biggi; Andrea Mina; Federico Tamagni
  6. Input varieties and growth : a micro-to-macro analysis By David R. Baqaee; Ariel Burstein; Cédric Duprez; Emmanuel Farhi
  7. Entrepreneur Education and Firm Credit Outcomes By Yusuf Emre Akgunduz; Abdurrahman B. Aydemir; Halil Ibrahim Aydin
  8. Political risk and external finance: Evidence from cross-country firm-level data By Olayinka Oyekola; Meryem Duygun; Samuel Odewunmi; Temitope Fagbemi
  9. Exports and firm survival in times of COVID-19 – Evidence from eight European countries By Joachim Wagner
  10. R&D Subsidy and Import Substitution: Growing in the Shadow of Protection By Gustavo de Souza
  11. An Analysis of the Impact of Minimum Wages on Firm Dynamics (Japanese) By FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug

  1. By: Fritsch, Michael (University of Jena); Sorgner, Alina (John Cabot University); Wyrwich, Michael (University of Groningen)
    Abstract: We propose an extension of the standard occupational choice model to analyze the life satisfaction of senior entrepreneurs as compared to paid employees and particularly retirees in Germany. The analysis identifies income and health status as main factors that shape the relationship between occupational status and life satisfaction. Senior entrepreneurs enjoy higher levels of life satisfaction than retirees and senior paid employees. This higher life satisfaction is mainly due to their higher income. Physical and mental health play a crucial role in determining both an individual's occupational status and their overall life satisfaction. We find that senior self-employed report to be healthier compared to other groups of elderly individuals. However, when controlling for health, retirees exhibit an even higher level of life satisfaction compared to their self-employed counterparts. Heterogeneity analysis of various types of senior entrepreneurs and senior paid employees confirms this general pattern. In addition, we find some evidence indicating that senior entrepreneurs may compromise their leisure time, a main asset of retired individuals. Implications for research, policy, and practitioners are discussed.
    Keywords: senior entrepreneurship, health conditions, well‐being, life satisfaction, age
    JEL: L26 I31 J10 D91
    Date: 2023–10
  2. By: Blimpo, Moussa (University of Toronto); Pugatch, Todd (Oregon State University)
    Abstract: The persistently high employment share of the informal sector makes entrepreneurship a necessity for youth in many developing countries. We exploit exogenous variation in the implementation of Rwanda's entrepreneurship education reform in secondary schools to evaluate its effect on student economic outcomes up to three years after graduation. Using a randomized controlled trial, we evaluated a three-year intensive training for entrepreneurship teachers, finding pedagogical changes as intended and increased entrepreneurial activity among students. In this paper, we tracked students following graduation and found that increased entrepreneurship persisted one year later, in 2019. Students from treated schools were six percentage points more likely to be entrepreneurs, an increase of 19 percent over the control mean. However, gains in entrepreneurship faded after three years, in 2021. Employment was six percentage points lower in the treatment group. By some measures, income and profits were lower in the treatment group, with no robust differences in these outcomes overall. Lower incomes and profits were concentrated among marginal students induced into entrepreneurship by the program. Youth entrepreneurship programs may therefore steer some participants away from their comparative advantage. Nonetheless, the program increased university enrollment, suggesting the potential for higher long run returns.
    Keywords: entrepreneurship education, youth employment, secondary school, pedagogy, randomized controlled trials, Rwanda
    JEL: I25 I26 I28 J24 O12 O15
    Date: 2023–09
  3. By: Domenico Delli Gatti; Roberta Terranova; Enrico Maria Turco
    Abstract: In this paper we replicate most of the stylized facts characterizing the decline in business dynamism in the USA highlighted by Akcigit and Ates (2021) and provide an explanation of their emergence by means of a macroeconomic agent-based model populated by two types of firms: innovators who generate new and more productive capital goods, and entrepreneurs who employ labor and capital goods to produce consumption goods. A key ingredient of the model is the assumption that the entrepreneurs’ access to new and better capital goods depends on the knowledge gap, i.e., the wedge between the firm’s technical knowledge and the state of technology embodied in new capital goods. Within this framework, we investigate the obstacles to knowledge diffusion subsequently leading to declining business dynamism. Our findings indicate that only when knowledge diffusion decreases in both the technology imitation and adoption processes does it lead to high market concentration and markups, falling labor share and productivity growth. Patents are an important obstacle to knowledge diffusion. We find an inverse U-shaped relationship between patent strength and growth: moderate levels of patent protection can stimulate growth, but strong protection leads to rising market power and slower growth.
    Keywords: innovation, imitation, knowledge diffusion, knowledge gap, patents
    JEL: O31 O32 O33 O34
    Date: 2023
  4. By: Green, David A.; Liu, Huju; Ostrovsky, Yuri; Picot, Garnett
    Abstract: Firm ownership is a defining feature of immigrant adaptation with 41% of immigrants owning a firm at some point in their first 10 years after arrival. We use rich Canadian administrative data linking immigrant arrival records with individual and firm tax data to examine the process by which immigrants enter firm ownership. We find that higher immigrant firm ownership rates are almost entirely associated with nonincorporated firm ownership, which looks like a state of last resort. Human capital plays no role in the opening of preferable incorporated firms. On balance, immigrants are not more entrepreneurial in terms of opening incorporated firms with employees and standard policy levers appear to have limited effect on this.
    Date: 2023
  5. By: Gianluca Biggi; Andrea Mina; Federico Tamagni
    Abstract: Using a firm-level dataset from the Spanish Technological Innovation Panel (2003-2016), this study explores the characteristics of environmentally innovative firms and quantifies the effects of pursuing different types of environmental innovation strategies (resource-saving, pollution-reducing, and regulation-driven innovations) on sales, employment, and productivity dynamics.
    Date: 2023–10
  6. By: David R. Baqaee (University of California); Ariel Burstein (E University of California); Cédric Duprez (Economics and Research Department, National Bank of Belgium and University of Mons); Emmanuel Farhi (tragically passed away in July 2020.)
    Abstract: We investigate the effects of input variety creation and destruction on both micro- and macroeconomic outcomes using detailed data from Belgium. Our microeconomic analysis establishes that the elasticity of downstream firms’ marginal cost to supplier separation captures the area under the input demand curve, and this elasticity can be utilized to calibrate love-of-variety and Schumpeterian models. Empirically, we estimate that marginal costs rise by 0.6% for every 1% of suppliers lost. Our macroeconomic analysis develops a growth-accounting framework that captures the role of supply chain churn for aggregate growth. Using firm-level production network data and estimated microeconomic elasticities, we show that supplier churn can plausibly account for a large portion of the trend component of growth in aggregate productivity. Our findings highlight the crucial role of input entry and exit in driving economic growth.
    Keywords: growth, churn, exit, entry
    JEL: D21 D22 E10
    Date: 2023–10
  7. By: Yusuf Emre Akgunduz; Abdurrahman B. Aydemir; Halil Ibrahim Aydin
    Abstract: We estimate the causal effects of entrepreneur education on credit outcomes. We link credit and business registries and identify the effects of education on access to credit, loan terms and default using a compulsory schooling reform implemented in Türkiye. More educated cohorts have higher access to credit, receive 3.3 percent larger loans and pay 0.23 percentage points lower interest rates compared to less educated cohorts despite no differences in borrowers' creditworthiness. We test alternative explanations for our findings and conclude that education reduces credit search costs and enables borrowers to shop around banks for better loan terms.
    Keywords: Compulsory schooling, Entrepreneurship, Bank loans
    JEL: G21 I25 O16
    Date: 2023
  8. By: Olayinka Oyekola (Department of Economics, University of Exeter); Meryem Duygun (Business School, University of Nottingham); Samuel Odewunmi (Department of Economics, University of Exeter); Temitope Fagbemi (Aberdeen Business School, Robert Gordon University)
    Abstract: Drawing on the strands of literature on agency theory, institutions and financial development, this paper investigates whether, and how, political risk can explain access to external finance by 127, 542 firms in 108 countries over the period 2006 to 2021. We do this by combining international firm-specific data with a globally representative political risk measure to explore variations in access to external finance for working capital and fixed investment by firms. Our results provide robust evidence of a strong positive impact of political risk on external finance. Specifically, we find that a one-standard-deviation increase in political risk leads to a 10.89% increase in access to external finance for working capital of sampled firms. We then examine which dimensions of political risk matter for external finance, finding that bureaucratic quality, corruption, government stability, socioeconomic conditions, investment profile, external conflict, and ethnic tensions are the relevant individual components. Further analyses show that the effects of political risk on external finance for working capital are amplified for firms that are either experiencing low growth, innovative, in the service sector, or small- and medium-sized enterprises. Our results survive a battery of robustness checks, including an alternative proxy for external finance (fixed investment), controlling for additional confounding factors and outliers. Given the central importance of firms as engines of growth, our paper makes an insightful contribution to the literature on the institutional determinants of access to entrepreneurial financing by firms.
    Keywords: political risk, institutions, access to finance, external finance, working capital, firm-level evidence
    JEL: G20 G30 O16 O50 L26
    Date: 2023–10–01
  9. By: Joachim Wagner (Leuphana Universität Lüneburg, Institut für Volkswirtschaftslehre and Kiel Centre for Globalization)
    Abstract: This paper uses firm level data from the World Bank Enterprise surveys conducted in 2019 and from the COVID-19 follow-up surveys conducted in 2020 in eight European countries to investigate the link between exporting before the pandemic and firm survival until 2020. The estimated effect of exports is positive and statistically significant ceteris paribus after controlling for various firm characteristics that are known to be related to firm survival. Furthermore, the size of this estimated effect can be considered to be large on average. Exporting helped firms to survive.
    Keywords: Exports, firm survival, COVID-19, World Bank Enterprise Surveys, Robit regression
    JEL: D22 F14 L20 L25 L29
    Date: 2023–10
  10. By: Gustavo de Souza
    Abstract: I study the effect of an innovation subsidy on the growth of firms in a developing country. Using administrative microdata for Brazil and difference-in-differences, I find that innovation subsidies drive firm growth by facilitating firm entry into high-tariff markets with domestically produced versions of foreign goods. After receiving an innovation subsidy, firms issue more patents, expand their workforce, and diversify their product line. However, these patents receive minimal citations, while also heavily citing foreign patents. Firms increase imports of foreign inputs and expand their product line towards products with high import tariff. Despite that, in the most conservative estimate, every $1 of innovation subsidy generated $10 in present value wages.
    Keywords: R&D; Industrial policy; Industrial development
    JEL: O3 O14 O25
    Date: 2023–10–05
  11. By: FUKAO Kyoji; KIM YoungGak; KWON Hyeog Ug
    Abstract: The recent minimum wage increase may have a cleansing effect by raising labor costs and causing inefficient firms to exit, while it may encourage firm dynamics by stimulating the entry and growth of more productive firms due to the reduced competition caused by the exit of firms. In addition to previous studies that have focused on manufacturing establishments and firms, this study analyzes the impact of minimum wage increases on industrial dynamics including entry and exit of firms and establishments and employment changes in a market economy that includes mainly non-manufacturing industries by utilizing data from Economic Census for Business Frame and Economic Census for Business Activity of the Ministry of Economy, Trade and Industry and the Ministry of Internal Affairs and Communications. The main findings from the analysis are as follows. (1)Minimum wage increases are positively related to increases in labor productivity and TFP of firms, but this positive relationship is limited to firms and prefectures with higher productivity and wages. (2) Japanese firms responded to minimum wage increases in 2011-2015 by reducing capital and regular employees and significantly increasing temporary employees. The total number of employees was not affected, but temporary employees replaced regular employees. The decrease in regular employees was more pronounced in firms with lower average wages and total factor productivity. (3) Although this reduced the capital-labor ratio of firms, firms increased TFP supposedly by introducing IT technology such as e-commerce, with labor productivity increased. (4) Raising the minimum wage is positively associated with encouraging firms to exit.
    Date: 2023–10

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