The Long-Term Impact of Inequality on Entrepreneurship and Job Creation

We assess the extent to which historical levels of inequality affect the likelihood of businesses being created, surviving and of these creating jobs overtime. To this end, we build a pseudo-panel of entrepreneurs across 48 countries using the Global Entrepreneurship Monitor Survey over 2001-2009. We complement this pseudo-panel with historical data of income distribution and indicators of current business regulation. We find that in countries with higher levels of inequality in the 1700s and 1800s, businesses today are more likely to die young and create fewer jobs. Our evidence supports economic theories that argue initial wealth distribution influences countries’ development path, having therefore important policy implications for wealth redistribution.