What's Driving the Decline in Entrepreneurship?

Abstract

Why has there been a steady decline in entrepreneurship in the US in recent decades? This paper addresses this question from an occupational choice perspective with new empirical facts about trends in peoples' labor market choices and the size of the businesses of entrepreneurs over time, interpreted with a dynamic occupational choice model. By using changes in entrepreneurship along multiple dimensions and the structure of the model, the contribution of a range of forces to the changes in entrepreneurship from 1987 to 2015 are estimated. Increasing entry costs are found to explain most of the decline in the share of people who are entrepreneurs and most of the decline in the entry rate of firms. Skill-biased technical change has tilted entrepreneurship towards less educated people, but this change to the economy has had little impact on the level of entrepreneurship. Empirical evidence suggests that the rise in entry costs is coming from both increasing regulation and changes in technology.

Read the 'What's Driving the Decline in Entrenpreneurship' paper (PDF, 854.5 KB)

About the speaker

Nicholas Kozeniauskas is an economist interested in firm dynamics and their relevance for aggregate economics questions. He is currently a Research Economist at the Bank of Portugal and a member of the Business and Economics Research Unit at Catolica-Lisbon. His research is in the fields of macroeconomics, international trade and entrepreneurship. 

If you would like to meet with Nic Kozeniauskas, please contact Dr Andres Bellofatto (a.bellofatto@uq.edu.au).