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Entrepreneurship, Economic Risks, and Risk Insurance in the Welfare State: Results with OECD Data 1978-93

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Author Info
Pekka Ilmakunnas
Vesa Kanniainen ()

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Abstract

We find evidence in the OECD cross-country data to support the Knightian view that non-diversifiable economic risks shape equilibrium entrepreneurship in an occupational choice model. Differential social insurance of entrepreneurial and labor risk is found to be statistically significant and detrimental to entrepreneurship. The crowding-out effect of public production of private goods on entrepreneurship dominates the crowding-in effect of public production of public goods in the OECD data. Weak evidence is found for the proposition that the rate of entrepreneurship is related to the degree of income inequality and to the union power in the economy. The results also suggest that a high living standard has a detrimental effect on self-employment.

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Publisher Info
Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 356.

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Date of creation: 2000
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Handle: RePEc:ces:ceswps:_356

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Related research
Keywords: Entrepreneurship; risks; the welfare state; social risk insurance; crowding-out;

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Find related papers by JEL classification:
D20 - Microeconomics - - Production and Organizations - - - General
G30 - Financial Economics - - Corporate Finance and Governance - - - General
H10 - Public Economics - - Structure and Scope of Government - - - General
L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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    Other versions:
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  13. Acs, Zoltán J & Audretsch, David B & Evans, David S, 1994. "Why Does the Self-Employment Rate Vary Across Countries and Over Time?," CEPR Discussion Papers 871, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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    Other versions:
  21. Kihlstrom, Richard E & Laffont, Jean-Jacques, 1979. "A General Equilibrium Entrepreneurial Theory of Firm Formation Based on Risk Aversion," Journal of Political Economy, University of Chicago Press, vol. 87(4), pages 719-48, August. [Downloadable!] (restricted)
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