Firm age, investment opportunities, and job creation
Manuel Adelino, Song Ma, David Robinson 12 February 2014
There is a strong link between entrepreneurship and growth – young firms were responsible for almost all net job creation in the US economy over the last 30 years. This column presents new research into the responsiveness of firms of different ages to investment opportunities. Firms aged 0–23 months create about twice the total number of new jobs in response to local income shocks than firms that are more than six years old.
Economists have long been concerned with understanding how firms respond to changing investment opportunities. Indeed, this question is central to ongoing policy discussions about economic growth and job creation, since the way firms create jobs is by increasing investment and employment in response to new economic opportunities. The startup process and economic growth are deeply interconnected – over the last 30 years, young firms were responsible for almost all net job creation in the economy (Haltiwanger et al. 2009, 2013, Stangler and Litan 2009).
Financial markets Labour markets Productivity and Innovation
employment, US, growth, entrepreneurship, job creation, firm age
Social and economic effects of return migration to Egypt
Simone Bertoli, Francesca Marchetta 04 October 2013
Return migrants have major social and economic consequences for their countries of origin. This column uses Egyptian household-level data to analyse the effects of migrants returning from neighbouring Arab countries. Start-up firms by returnees are more likely to survive, and returnee families tend to have more children. These results imply that return migration may not be an unmitigated blessing for Egypt.
A number of demographic, social, and economic factors constitute 'irresistible forces' that are contributing to the rise of the scale of international migration (Pritchett, 2006). The economic literature has not yet fully explored the wise array of effects this phenomenon can have on migrants’ countries of origin. When migration is predominantly temporary in nature, returnees represent a natural focal point of the analysis, as moving across borders can reshape the behaviour and the choices made by the migrants once they return home.
entrepreneurship, fertility, migration
The origins of entrepreneurship and innovation clusters
Aaron Chatterji, Edward Glaeser, William Kerr 04 June 2013
Contrary to received wisdom, entrepreneurial clusters in the US – like Silicon Valley – are seen as success stories. But what is the rationale behind these clusters? Do they actually work? This column reviews the evidence and discusses localised policies currently being pursued in the US. In general, our understanding of what works remains limited and economists should more thoroughly pursue researching the effects of entrepreneurial clusters.
For decades, the conventional wisdom among local officials pursuing employment growth was to attract a large firm to relocate. ‘Smokestack chasing’ often leads to zero-sum games where regional governments bid against each other to provide substantial incentives to large companies making location choice decisions (e.g. Greenstone et al. 2010).
What explains gender differences in India? What can be done to promote shared prosperity?
Ejaz Ghani, William Kerr, Stephen D O'Connell 22 February 2013
Although its economic development has been impressive, recent events have sparked debate about India’s gender inequality. This column argues that Indian women’s levels of entrepreneurship and participation in the labour force are some of the lowest in the world. India’s economic growth and shared prosperity depends upon successfully utilising both its male and female workforce, and improving this balance is an important step towards sharing the benefits of India’s growth. Economically and socially, gender equality should be a no-brainer for policymakers.
Despite rapid economic growth during the last two decades, gender disparities remain deep and persistent in India (e.g. Duflo 2012, World Bank 2012). The UN Gender Inequality Index ranks India below several sub-Saharan African countries, and the World Economic Forum ranks India 113 out of 135 countries in its Global Gender Gap Report (Hausmann, Tyson and Zahidi 2011).
gender, entrepreneurship, India, Business
Do return migrants need their social capital for entrepreneurship?
Yves Zenou, Jackline Wahba 19 August 2012
Are return migrants more likely to become entrepreneurs than non-migrants? This column, using data from Egypt, argues that although migrants lose their social networks whilst overseas, savings and human capital accumulation acquired abroad overcompensate for this loss. This makes return migrants more likely to start businesses.
What makes an entrepreneur? This question has been the focus of few previous studies. The rather small body of literature on this issue has put forward the importance of financial constraints in becoming an entrepreneur. Access to credit is seen as a major obstacle for entrepreneurship (e.g. Banerjee and Newman 1983). Limited personal and family savings and lack of access to credit are seen to severely limit the growth prospects of promising start-ups in developing countries.
entrepreneurship, migration, social capital, Egypt
Why do entrepreneurs locate where they do?
Ejaz Ghani, William Kerr, Stephen D O'Connell 26 February 2012
Entrepreneurship is often held aloft as the missing ingredient for growth in many economies, particularly developing countries. But for many policymakers, entrepreneurs are a mystery. This column looks at India and asks why entrepreneurs locate where they do.
Productivity and Innovation
Entrepreneurial finance and public policy
William Kerr, Ramana Nanda 27 April 2010
How should a government promote entrepreneurship? This column argues that providing support programmes for targeted sectors or companies is akin to “picking winners ex ante”. A far better approach is to encourage competition in the financial sector that facilitates experimentation in the real economy. Governments should forget about picking winners and focus on picking the right system.
The process of “creative destruction”, whereby entrepreneurs with new ideas and methods of production displace less efficient incumbents, is believed to play a critical role in driving productivity growth in the economy. High-profile entrepreneurs create and commercialise new technologies such as automobiles and semiconductors – major innovations that spawn new industries. Although clearly important, such start-ups only represent a tiny proportion of overall entry in the economy.
Productivity and Innovation
entrepreneurship, picking winners, subsidy