The neoclassical model of the production function, as applied by Robert Solow to build the neoclassical model of growth, linked labor and capital to output. More recently, Romer and others have expanded the model to include measures of knowledge capital. In this paper we introduce a new factor, entrepreneurship capital, and link it to output in the context of a production function model. This paper explains what is meant by entrepre-neurship capital and why it should influence economic output. A production function model including several different measures of entrepreneurship capital is then estimated for German regions. The results indicate that entrepreneurship capital is a significant and important factor shaping output and productivity. These results sug-gest a new direction for policy that focuses on instruments to enhance entrepreneurship capital.
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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number
02-76.
Find related papers by JEL classification: M13 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - New Firms; Startups O32 - Economic Development, Technological Change, and Growth - - Technological Change - - - Management of Technological Innovation and R&D O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
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