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Economic Growth And The Optimal Level Of Entrepreneurship, James E. Prieger, Catherine Bampoky, Luisa R. Blanco, Aolong Liu

All Faculty Open Access Publications

Using data from the Global Entrepreneurship Monitor (GEM), we examine data from developed and developing countries to estimate the ‘‘growth penalty” over 2003–11 when a country’s entrepreneurship deviates from its optimal level. We account for heterogeneity among countries in the optimal entrepreneurship rate, in the growth penalty from deviating from that optimum, and in other factors affecting growth. Notwithstanding that developing countries have more of their population running nascent small firms than in developed countries, a marginal increase in the entrepreneurship rate in developing countries has a positive effect on growth. On the contrary, in developed countries, there is no …