The Lag Structure of the Impact of Business Ownership on Economic Performance in OECD Countries

Abstract

This paper investigates the impact of changes in the number of business owners on three measures of economic performance, viz. employment growth, GDP growth and labor productivity growth. Particular attention is devoted to the lag structure. The analysis is performed at the country level for 21 OECD countries. Our results confirm earlier evidence on three stages in the impact of entry on economic performance: an initial direct positive effect, followed by a negative effect due to exiting capacities and finally a stage of positive supply-side effects. The net effect is positive for employment and GDP growth. Changes in the number of business owners have no effect on labor productivity. ABSTRACT: This paper investigates the impact of changes in the number of business owners on three measures of economic performance, viz. employment growth, GDP growth and labor productivity growth. Particular attention is devoted to the lag structure. The analysis is performed at the country level for 21 OECD countries. Our results confirm earlier evidence on three stages in the impact of entry on economic performance: an initial direct positive effect, followed by a negative effect due to exiting capacities and finally a stage of positive supply-side effects. The net effect is positive for employment and GDP growth. Changes in the number of business owners have no effect on labor productivity.

New business formation and the productivity of manufacturing incumbents: Effects and mechanisms

“…4 E.g., Bosma (2011), Bosma, Stam andSchutjens (2011), Callejon and Segarra (1999), and Carree and Thurik (2008).…”

The effect of new business creation on employment growth in regions facing population decline

“…The stronger the start-ups, the bigger the displacement effect will be. Stage 2 negatively influences employment, not only due to the indirect displacement effect but also direct due to the failure of new firms (Baptista et al 2005;Fritsch and Mueller 2004;Carree and Thurik 2008).…”

Linking Entrepreneurship and Economic Growth in Sweden, 1850–2000

“…mortality and selection) and, finally, a positive supply-side effect on employment growth. 14 Following these results, Carree and Thurik (2008) tested whether direct and indirect supply-side effects are at hand also at the aggregate level, employing a panel of 21 OECD countries (Compendia) over 15 years. They measured the lagged relative effects of net change in business ownership on employment growth, GDP growth and labor productivity growth.…”