Demographics and Entrepreneurship

NBER Working Paper No. 20506

Issued in September 2014, Revised in November 2016

NBER Program(s):Industrial Organization, Labor Studies



Entrepreneurship requires energy and creativity as well as business acumen. Some factors that contribute to entrepreneurship may decline with age, but business skills increase with experience in high level positions. Having too many older workers in society slows entrepreneurship. Older workers do not possess the advantages of youth, but more significant is that when older workers occupy key positions they may block younger workers from acquiring business skills. A formal theoretical structure is presented and tested using the Global Entrepreneurship Monitor data. The results imply that a one-standard deviation decrease in the median age of a country increases the rate of new business formation by 2.5 percentage points, which is about forty percent of the mean rate. Furthermore, older societies have lower rates of entrepreneurship at every age.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w20506

Published: James Liang & Hui Wang & Edward P. Lazear, 2018. "Demographics and Entrepreneurship," Journal of Political Economy, vol 126(S1), pages S140-S196.

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