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Entrepreneurship: A Weak Link in the Welfare State

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Author Info
Henrekson, Magnus () (Dept. of Economics, Stockholm School of Economics)

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Abstract

Entrepreneurship is largely ignored or treated in a highly simplified way in endogenous growth theory. Still, it is now widely recognized that the supply of entrepreneurial talent is likely to be important for economic growth, innovation and job creation. This study consists of an in-depth examination of how the supply of productive entrepreneurship is likely to be affected by the kind of tax and welfare arrangements that typically prevail in a mature welfare state. Sweden, allegedly the most extensive of all welfare states, is the object of the empirical analysis. It is shown how key welfare state institutions have systematically reduced economic incentives both for opportunity-based and necessity entrepreneurship. Both aggregate economic performance and data on firm growth and direct measures of entrepreneurial activity are consistent with the identified structure of payoffs. A number of measures can be implemented to strengthen entrepreneurial incentives within extensive welfare states, but the fact still remains that an entrepreneurial culture and a welfare state are very remotely related. As a result, the respective cultures are unlikely to be promoted by a similar set of institutions.

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Publisher Info
Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 518.

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Length: 34 pages
Date of creation: 30 Nov 2002
Date of revision: 04 Mar 2005
Publication status: Published in Industrial and Corporate Change, 2005, pages 437-467.
Handle: RePEc:hhs:hastef:0518

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Related research
Keywords: Economic growth; Entrepreneurship; Innovation; Swedish model; Welfare state;

Other versions of this item:

Find related papers by JEL classification:
H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stenkula, Mikael, 2009. "Taxation and Entrepreneurship in a Welfare State," Working Paper Series 800, Research Institute of Industrial Economics. [Downloadable!]
  2. Kristina Nyström, 2008. "The institutions of economic freedom and entrepreneurship: evidence from panel data," Public Choice, Springer, vol. 136(3), pages 269-282, September. [Downloadable!] (restricted)
    Other versions:
  3. Koster, Sierdjan & Karlsson, Charlie, 2009. "New Firm Formation and Economic Development in a Globalizing Economy," Working Paper Series in Economics and Institutions of Innovation 167, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  4. Erik Stam & Roy Thurik & Peter van der Zwan, 2008. "Entrepreneurial Exit in Real and Imagined Markets," Tinbergen Institute Discussion Papers 08-031/3, Tinbergen Institute, revised 31 Dec 2008. [Downloadable!]
    Other versions:
  5. Henrekson, Magnus & Johansson, Dan, 2008. "Gazelles as Job Creators – A Survey and Interpretation of the Evidence," Working Paper Series 733, Research Institute of Industrial Economics. [Downloadable!]
    Other versions:
  6. Jolanda Hessels & Marco Gelderen & Roy Thurik, 2008. "Entrepreneurial aspirations, motivations, and their drivers," Small Business Economics, Springer, vol. 31(3), pages 323-339, October. [Downloadable!] (restricted)
  7. Andrews, Matthew, 2008. "Are One-Best-Way Models of Effective Government Suitable for Developing Countries?," Working Paper Series rwp08-014, Harvard University, John F. Kennedy School of Government. [Downloadable!]
  8. Zoltan Acs & Pontus Braunerhjelm & David Audretsch & Bo Carlsson, 2009. "The knowledge spillover theory of entrepreneurship," Small Business Economics, Springer, vol. 32(1), pages 15-30, January. [Downloadable!] (restricted)
    Other versions:
  9. Martin Carree & André van Stel & Roy Thurik & Sander Wennekers, 2007. "The Relation between Economic Development and Business Ownership revisited," Tinbergen Institute Discussion Papers 07-022/3, Tinbergen Institute. [Downloadable!]
  10. Nyström, Kristina, 2008. "Regional Institutional Environment and Swedish Regional New Firm Formation," Working Paper Series in Economics and Institutions of Innovation 142, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies. [Downloadable!]
  11. Christian Bjørnskov & Nicolai Foss, 2008. "Economic freedom and entrepreneurial activity: Some cross-country evidence," Public Choice, Springer, vol. 134(3), pages 307-328, March. [Downloadable!] (restricted)
    Other versions:
  12. Douhan, Robin & Henrekson, Magnus, 2007. "The Political Economy of Entrepreneurship: An Introduction," Working Paper Series 688, Research Institute of Industrial Economics. [Downloadable!]
  13. Douhan, Robin & Henrekson, Magnus, 2007. "The Political Economy of Entrepreneurship," Working Paper Series 716, Research Institute of Industrial Economics.
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