Abstract
Recent developments in entrepreneurship suggest a causal link between entrepreneurial activity and economic growth: entrepreneurship precedes economic growth. A positive effect from entrepreneurship on economic development in advanced, innovation-driven economies in the most recent decades is often maintained. Self-employment is one of the most common indicators of entrepreneurship. The present study uses very long series of non-interrupted data on self-employment in Sweden (1850–2000). It analyzes the relationship between variations in self-employment and economic growth. For the entire period, variations in self-employment had a significant, instantaneous positive correlation with GDP growth. However, no causal relationship could be discovered: variations in self-employment did not (Granger) cause GDP growth.
We discovered a structural break in GDP growth as early as in the year of 1948. Up until 1948, (Granger) causality between self-employment and GDP could not be established for any direction. For the other segment (1949–2000), GDP growth (Granger) caused self-employment growth, but not the other way around. For the period 1949–2000, but not for the previous period, self-employment lagged with respect to GDP growth. Consequently, GDP growth preceded self-employment growth, but self-employment growth did not precede GDP growth. Given that self-employment is a suitable indicator, the empirical results in this study are, in several respects, in disagreement with dominating assumptions in mainstream research.
Keywords
This study is part of the research project Entrepreneurship, Innovation, and the Demography of Firms and Industries in Sweden over Two Centuries, financed by Riksbankens Jubileumsfond (P12-1122:1).
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- 1.
Furthermore, over the past 200 years—and in contrast to several other countries—Sweden has not been directly affected by catastrophes, severe civil conflict, wars, or foreign occupation that may interrupt or infer statistical series.
- 2.
For instance, Schumpeter regarded the entrepreneur as an agent, or as a group of agents that introduced innovations. Schumpeter’s entrepreneurs create disequilibria, while Kirzner’s entrepreneurs are arbitrators that establish market equilibrium. For Knight, all small business owners are entrepreneurs. In disagreement with Knight, the Schumpeterian entrepreneur is not a risk taker or owner. In his late works, Schumpeter defines the entrepreneur as an economic function, while Kirzner personalizes the entrepreneurs into individuals endowed with the ability to identify opportunities that others cannot. Entrepreneurship in the Kirznerian sense does not require innovation.
- 3.
- 4.
Compendia records OECD data on business ownership from the 1970s (Van Stel 2005). GEM is survey-based and has produced shorter cross-country time series (starting in 1999) (see Bosma and Levie 2010). It has been noted that the method of harmonizing data can be somewhat simplistic and that it may produce incorrect figures (Bjuggren et al. 2010).
- 5.
For a critical view of the concept of the entrepreneurial economy, see Parker (2001).
- 6.
From a different angle, sociologists have suggested that the observed increase in self-employment from the 1970s in developed economies may be a structural response to declining opportunities for good jobs in the industrial sector rather than, as in earlier times, a cyclical response to unemployment (Steinmetz and Wright 1989; Bögenhold and Staber 1991).
- 7.
Within the framework of the GEM-project, an S-shaped model founded in Porter’s typology of factor-, efficiency-, and innovation-driven economies has evolved (Acs and Szerb 2009; Bosma et al. 2008). Related lines of thought are found in a U-shaped stage model in which entrepreneurship is high in low-income countries, lower in middle-income countries (where economies of scale increase), and high in advanced economies (Wennekers et al. 2010).
- 8.
From a visual inspection of Fig. 1 this observation seems partially reasonable. The Swedish postwar-period exhibited a very long stage of high macroeconomic growth, a time during which self-employment fell sharply. The years from the early 1970s were characterized by slower economic growth and crises. The relative take-off in self-employment in the early 1990s also corresponds to the onset of the economic depression. When the economy recovered in the second half of the last decade of the century, self-employment apparently fell again. For a description of the Swedish economy, see Schön (2010).
- 9.
This dating approach is according to the assumption that the number of breaks, m, is known. Since there exists no prior knowledge of m, we shall first determine the value of m. To determine a reasonable m, we specify different models with different possible m; for instance, we set m = 0, 1, 2, …, M. M will be determined based on the associated model that minimizes BIC.
- 10.
The immediate post-war years have been described as an economic-political ‘system crisis’ that, in principle, ended in 1948 (Lundberg 1983).
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Box, M., Lin, X., Gratzer, K. (2016). Linking Entrepreneurship and Economic Growth in Sweden, 1850–2000. In: Bögenhold, D., Bonnet, J., Dejardin, M., Garcia Pérez de Lema, D. (eds) Contemporary Entrepreneurship. Springer, Cham. https://doi.org/10.1007/978-3-319-28134-6_3
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