The Importance of Entrepreneurship on Economic Development. Evidence From the OECD Countries
Keywords:entrepreneurship, economic development, human development index, panel data, dynamic regression
The process of a country's economic growth and development is a very complex phenomenon, influenced by numerous factors, which has attracted the attention of researchers and policymakers over time. Several studies highlight the important role of entrepreneurship on economic growth, by introducing innovative technologies, creating new products, promoting new jobs and employment opportunities, but also improving competition and competitiveness. Although the impact of entrepreneurship on economic growth has been broadly analysed in the economic literature over the recent years, few studies have examined the impact of entrepreneurship on economic development. The aim of this paper is to fill this gap, using the Human Development Index (HDI) as a suitable proxy for measuring economic development, taken from the United Nations statistics. HDI is a composite measure of average achievement in key dimensions of human development, such as, life expectancy, education level and standards of living. On the other hand, Entrepreneurship is measured by Total Entrepreneurial Activity (TEA) taken from the Global Entrepreneurship Monitor, which expresses the percentage of population with age between 18 and 64, who are either a nascent entrepreneur or owner-manager of a new business. The empirical model is drawn from the endogenous growth theory, assuming that entrepreneurship and human capital skills are the key drivers of economic development, along with capital stock. The empirical analysis is based on unbalanced panel data regressions for a sample of 37 OECD countries using annual data for the period 2000-2018. Estimating a dynamic panel data model by using the GMM two-step system approach, we obtain evidence indicating the positive association between the development level and entrepreneurship, as well as the positive impact of human capital and capital stock on development. Our empirical results are in line with the endogenous growth theory approach, showing that entrepreneurship can be considered as an additional factor input in the countries’ economic development pathway.