Betting on Your Own Skills: Evidence From a Pseudo-Experiment on Economic Disruption

Abstract

Using a representative sample of the Swedish male population from 1966 to 2006, we study which "skills" make it easier for individuals to cope with major economic and social changes. We distinguish between social and cognitive skills and investigate how they differentially affect the incentives to engage in entrepreneurship in response to changes in local economic and environmental conditions. We focus on new firm creation and self-employment. We find that only cognitive skills foster the creation of viable businesses. When an economic disruption occurs – the opening of the Oresund Bridge between Denmark and Sweden –cognitive skills stimulate long-term profitable entrepreneurship.

Keywords: Economic and Social Disruption, Entrepreneurial Choice, Firm Creation, Social Skills, Cognitive Skills, IQ.

JEL Classification: G11, M13, J24