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Entrepreneurial Human Capital and Firm Dynamics
[How Large Are Human-Capital Externalities? Evidence from Compulsory Schooling Laws]

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  • Francisco Queiró

Abstract

This article shows that entrepreneurial human capital is a key driver of firm dynamics using administrative panel data on the universe of firms and workers in Portugal. Firms started by more educated entrepreneurs are larger at entry and exhibit higher life cycle growth. Consistent with an effect on growth, the thickness of the right tail of the size distribution increases with entrepreneur schooling. The evidence points to several underlying mechanisms, with technology adoption playing the most important part. I develop and estimate a model of firm dynamics that can parsimoniously account for these findings and use it to draw aggregate implications. Accounting for the effect of entrepreneurial human capital on firm dynamics can substantially increase aggregate returns to schooling and the fraction of cross-country income differences explained by human and physical capital.

Suggested Citation

  • Francisco Queiró, 2022. "Entrepreneurial Human Capital and Firm Dynamics [How Large Are Human-Capital Externalities? Evidence from Compulsory Schooling Laws]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(4), pages 2061-2100.
  • Handle: RePEc:oup:restud:v:89:y:2022:i:4:p:2061-2100.
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    File URL: http://hdl.handle.net/10.1093/restud/rdab070
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    2. Anna Valero, 2021. "Education and economic growth," CEP Discussion Papers dp1764, Centre for Economic Performance, LSE.
    3. Anna Valero, 2021. "Education and management practices," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 37(2), pages 302-322.
    4. Quignon, Aurelien, 2023. "Crowd-based feedback and early-stage entrepreneurial performance: Evidence from a digital platform," Research Policy, Elsevier, vol. 52(7).
    5. Catherine Laffineur & Maria Minniti & Benjamin Montmartin, 2023. "Does Knowledge in Management Foster Firm Creation and Performance?," GREDEG Working Papers 2023-19, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    6. Sivropoulos-Valero, Anna Valero, 2021. "Education and management practices," LSE Research Online Documents on Economics 114436, London School of Economics and Political Science, LSE Library.
    7. Jarkko Harju & Toni Juuti & Tuomas Matikka, 2023. "Stairway to Heaven? Selection into Entrepreneurship, Income Mobility and Firm Performance," Working Papers 17, Finnish Centre of Excellence in Tax Systems Research.

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    More about this item

    Keywords

    Firm dynamics; Human capital; Entrepreneurship; Aggregate productivity;
    All these keywords.

    JEL classification:

    • I2 - Health, Education, and Welfare - - Education
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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