Entrepreneurship, Institutions, and Economic Growth

33 Pages Posted: 24 Jul 2019

See all articles by Christopher Boudreaux

Christopher Boudreaux

Florida Atlantic University

Steven B. Caudill

Auburn University - Department of Economics

Date Written: April 1, 2019

Abstract

This study questions the assumption that entrepreneurship unequivocally leads to economic growth. Using insights from institutional theory and development economics, we reevaluate entrepreneurship’s contribution towards economic growth. Our study uses Global Entrepreneurship Monitor (GEM) data for a panel of 83 countries from 2002 to 2014 and highlights several important findings. First, our evidence suggests that entrepreneurship encourages economic growth but not in developing countries. Second, we find that a country’s institutional environment - measured by GEM’s Entrepreneurial Framework Conditions (EFCs) - contributes to economic growth in more developed countries but not in developing countries. Lastly, we find that opportunity-motivated entrepreneurship encourages economic growth in developed countries, while necessity-motivated entrepreneurship discourages economic growth in developing countries. These findings have important policy implications. Namely, our evidence contradicts policy proposals that suggest entrepreneurship and the adoption of pro-market institutions that support it will encourage economic growth in developing countries. Our evidence suggests these policy proposals are unlikely to generate the desired economic growth.

Keywords: Entrepreneurship, Institutions, Economic Growth, Policy, Global Entrepreneurship Monitor, Developing Countries

JEL Classification: L26, L53, M13, O43, O47

Suggested Citation

Boudreaux, Christopher and Caudill, Steven B., Entrepreneurship, Institutions, and Economic Growth (April 1, 2019). Available at SSRN: https://ssrn.com/abstract=3424797 or http://dx.doi.org/10.2139/ssrn.3424797

Christopher Boudreaux (Contact Author)

Florida Atlantic University ( email )

777 Glades Road
KH 145
Boca Raton, FL 33431
United States

HOME PAGE: http://home.fau.edu/cboudreaux/web/

Steven B. Caudill

Auburn University - Department of Economics ( email )

415 W. Magnolia
Auburn, AL 36849-5242
United States
334-844-2907 (Phone)

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