Citation:
Martin Carree, André van Stel, Roy Thurik and Sander Wennekers, The relationship between economic development and business ownership revisited. RP 8/07, Cranfield University School of Management
Abstract:
This paper revisits the two-equation model of Carree, van Stel, Thurik and Wennekers
(2002) where deviations from the ‘equilibrium’ rate of business ownership play a
central role determining both the growth of business ownership and that of economic
development. Two extensions of the original setup are addressed: using longer time
series of averaged data of 23 OECD countries (up to 2004) we can discriminate
between different functional forms of the ‘equilibrium’ rate and we allow for different
penalties for being above or under the ‘equilibrium’ rate. The additional data do not
provide evidence of a superior statistical fit of a U-shaped ‘equilibrium’ relationship
when compared to an L-shaped one. There appears to be a growth penalty for having
too few business owners but not so for having too many.