Extreme Events, Entrepreneurial Start-Ups, and Innovation: Theoretical Conjectures

37 Pages Posted: 9 Nov 2020

See all articles by Thomas Gries

Thomas Gries

University of Paderborn

Wim Naudé

RWTH Aachen University

Abstract

In light of the COVID-19 pandemic, we scrutinize what has been established in the literature on whether entrepreneurship can cause and resolve extreme events, the immediate and long-run impacts of extreme events on entrepreneurship, and whether extreme events can positively impact (some) entrepreneurship and innovation. Based on this, we propose a partial equilibrium model to provide several conjectures on the impact of COVID-19 on entrepreneurship and derive policy recommendations for recovery. Our model's comparative statics shows that entrepreneurship recovery will benefit from aggregate demand-side support measures, combined with direct subsidies for start-ups, firms' revenue losses, and loan liabilities, as well as from actions that promote income redistribution.

Keywords: entrepreneurship, innovation, COVID-19, extreme events, development

JEL Classification: I18, L26, L53, M13

Suggested Citation

Gries, Thomas and Naudé, Wim, Extreme Events, Entrepreneurial Start-Ups, and Innovation: Theoretical Conjectures. IZA Discussion Paper No. 13835, Available at SSRN: https://ssrn.com/abstract=3726437

Thomas Gries (Contact Author)

University of Paderborn ( email )

Warburger St. 100
Paderborn, D-33098
Germany

Wim Naudé

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

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