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Technical Change and Entrepreneurship

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  • Sergio Salgado

    (University of Minnesota)

Abstract

The proportion of entrepreneurs in the US working-age population has declined over the last three decades. Over the same period, there has been a substantial increase in the returns to highly educated workers. This paper relates these two facts. Using individual-level data, I provide evidence on the decline in the population share of entrepreneurs and in the entry rate into entrepreneurship. I also show that the decline is most concentrated among college graduates. Then, using an otherwise standard entrepreneurial choice model with two skill groups of individuals, I show that the decline in entrepreneurship is the equilibrium outcome of two forces that have increased the returns to high skill labor: the skill-biased technical change and the decrease in the cost of capital goods. I find that these two technological forces jointly account for three-quarters of the decline in the share of entrepreneurs observed in the United States over the last 30 years.

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  • Sergio Salgado, 2019. "Technical Change and Entrepreneurship," 2019 Meeting Papers 634, Society for Economic Dynamics.
    • Handle: RePEc:red:sed019:634
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