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Entrepreneurship and Economic Growth: An Investigation into the Relationship between Entrepreneurship and Total Factor Productivity Growth in the EU

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  • Andrzej P. Dabkowski

Abstract

Endogenous growth theory assigns an important role for entrepreneurship in the process of economic development. This paper sets to formally test the impact of entrepreneurship on economic growth. Entrepreneurship is represented by a number of proxy variables, whereas Total Factor Productivity is used as a measure of economic growth. Panel data of 26 European countries repeatedly sampled over a period of 11 years is used to estimate a Random Effects model. This study finds that entrepreneurship contributes to growth moderately. It is not, nonetheless, a dominant force shaping changes in TFP growth rates. Business Birth Rate, Self-employment Rate, Business Investment and Labour Productivity Growth were all found to be highly significant. The article concludes that more encompassing measure of entrepreneurship needs to be developed, one that would reflect the complexity of the notion.

Suggested Citation

  • Andrzej P. Dabkowski, 2011. "Entrepreneurship and Economic Growth: An Investigation into the Relationship between Entrepreneurship and Total Factor Productivity Growth in the EU," CASE Network Studies and Analyses 427, CASE-Center for Social and Economic Research.
    • Handle: RePEc:sec:cnstan:0427
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    More about this item

    Keywords

    entrepreneurship; total factor productivity; economic growth; the EU;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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