What’s driving the decline in entrepreneurship?

Why has there been a steady decline in entrepreneurship in the US in recent decades? To answer this question, I develop a general equilibrium occupation choice model and combine it with data on these choices. Skill-biased technical change can account for much of the decline in the relative entrepreneurship rate of more educated people, but cannot explain the decline in the aggregate level of entrepreneurship. The major factors in the decline in the share of people who are entrepreneurs, the firm entry rate, and the size of the entrepreneur sector are rising entry costs and outsized productivity gains by large non-entrepreneur firms. • Entrepreneurship has declined, more so for higher education groups. • This has not been offset by entrepreneur businesses becoming larger. • Rising entry costs and the growth of superstar firms can account for the aggregate decline. • Skill-biased technical change can account for much of the larger decline for more educated people.