The Dynamics of Entrepreneurship: Hysteresis, Business Cycles and Government Policy
30 Pages Posted: 29 Mar 2009
Date Written: March 27, 2009
This paper estimates an unobserved components model to explore the macro dynamics of entrepreneurship in Spain and the US. We ask whether entrepreneurship exhibits hysteresis, defined as a macro dynamic structure in which business cycle fluctuations have persistent effects on the natural rate of entrepreneurship. We find evidence of hysteresis in Spain, but not the US, while in both countries business cycle output variations significantly affect future rates of entrepreneurship. The article discusses implications of the findings for the design of entrepreneurship policies.
Keywords: Hysteresis, Unobserved components model, Time Series models, Business cycles, Self-employment, Entrepreneurship
JEL Classification: C32, J23, M13
Suggested Citation: Suggested Citation