Template-type: ReDIF-Paper 1.0
Author-Name: Naudé, Wim
Author-Email: w.naude@maastrichtuniversity.nl
Author-Workplace-Name: UNU-MERIT, Maastricht University, RWTH Aachen, and IZa, Bonn.
Title: The decline in entrepreneurship in the West: Is complexity ossifying the 
	 economy?
Abstract: Entrepreneurship in most advanced economies is in decline. This comes as 
	 a surprise: many scholars have expected an upsurge in entrepreneurship. 
	 What are the reasons for the decline? In this paper I first document the 
	 extent of the decline in terms of entrepreneurial entry rates; the share 
	 of young and small firms; and in terms of labor market mobility and in 
	 innovativeness. I then critically discuss the explanations that have 
	 been offered in the literature: slow population growth, market 
	 concentration, zombie-firm congestion, slower diffusion of knowledge, and 
	 burdensome business regulations. While having merit, these explanations 
	 are largely supply-side oriented and moreover fail to explain why the 
	 decline in entrepreneurship is associated with high levels of economic 
	 complexity. I argue that we need to consider the potential of negative 
	 scale effects and evolutionary pressures from rising complexity, as well 
	 as long-run changes in aggregate demand and energy costs. Whether the 
	 decline in entrepreneurship and the ossification of the economy is 
	 undesirable, is a point for debate, calling for more research and more 
	 attention to entrepreneurship in growth theories.
Classification-JEL: O47, O33, J24, E21, E25
Keywords: Entrepreneurship, start-ups, development, economic complexity, growth theory 
Series: UNU-MERIT Working Papers
Creation-Date: 20190911
Number: 2019-030
File-URL: https://unu-merit.nl/publications/wppdf/2019/wp2019-030.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2019030