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. In this study we provide 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 may prevail in a mature welfare state. Sweden, allegedly the most extensive of all welfare states, is the object of the empirical analysis. It is argued that the Swedish welfare state early on chose a specific “Swedish Model” of trying to combine ambitious welfare programs and a high tax burden with good opportunities for economic growth. This particular view rested heavily on the assumption that innovative activity was best performed in large established firms and that entry of new firms was less important. Consequently, policy and institutions were geared to promoting certain types of activities which could deliver growth if scale economies are important and intrapreneurship can substitute for entrepreneurship. However, in an environment where entry, exit and turnover of firms are important for growth, and where scale-economies are less important, this kind of model may be more problematic. Both aggregate economic performance and data on firm growth and direct measures of entrepreneurial activity are broadly consistent with the identified structure of payoffs. A number of measures that can be implemented to strengthen entrepreneurial incentives within extensive welfare states are discussed, 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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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
653.
Length: 42 pages Date of creation: 13 Nov 2005 Date of revision:
11 Jan 2006 Publication status: Published in The Handbook of Research on Entrepreneurship Policy, Audretsch, David B., Grilo, Isabel, Thurik, Roy (eds.), 2007, chapter 6, Edward Elgar. Handle: RePEc:hhs:iuiwop:0653
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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.:
Blanchflower, David G & Oswald, Andrew J, 1998.
"What Makes an Entrepreneur?,"
Journal of Labor Economics,
University of Chicago Press, vol. 16(1), pages 26-60, January.
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