Entrepreneurship, Welfare Provision and Unemployment: Relationships Between Unemployment, Welfare Provision, and Entrepreneurship in Thirty-Seven Nations Participating in the Global Entrepreneurship Monitor (GEM) 2002

Abstract

This paper studies the relationship between entrepreneurship and unemployment. We focus on Necessity TEA (total entrepreneurial activity for those individuals pushed into entrepreneurship because they have no better alternatives for work). We a priori predict that when unemployment is high, TEA (necessity) will be high as outside alternatives in the labor market diminish. Yet we also predict that this effect will be moderated in nations where unemployment benefits are high. In addition we focus on the composition of the stock of unemployed and how difficult, or easy, it is to start a new business. Both factors have been shown to be important in previous studies (Cowling and Mitchell, 1997; Robson, 1998). Our findings offer some support for our a priori predictions, but show that the unemployment effect is far more complex than previously believed.