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

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  • Pekka Ilmakunnas
  • Vesa Kanniainen

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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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 356.

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

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

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  3. Sinn, Hans-Werner, 1996. "Social Insurance, Incentives and Risk Taking," Munich Reprints in Economics 19834, University of Munich, Department of Economics.
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  25. Robin Boadway & Nicolas Marceau & Maurice Marchand & Marianne Vigneault, 1998. "Entrepreneurship, Asymmetric Information, and Unemployment," International Tax and Public Finance, Springer, vol. 5(3), pages 307-327, July.
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Cited by:
  1. Mikko Leppämäki & Vesa Kanniainen, 2000. "Entrepreneurship in a Unionised Economy," CESifo Working Paper Series 379, CESifo Group Munich.
  2. Mikael Stenkula, 2012. "Taxation and entrepreneurship in a welfare state," Small Business Economics, Springer, vol. 39(1), pages 77-97, July.

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