The management function of entrepreneurs and countries’ productivity growth

This article examines the determinants of the equilibrium number of entrepreneurs and the level of productivity in economies where individuals make occupational choices between being self-employed or working as an employee. The results of the theoretical model explain some observed empirical regularities, such as the negative association between productivity and self-employment rates in cross-country data. The article also derives and empirically tests an unexplored relationship between entrepreneurship and economic growth, in the form of a positive association between productivity growth in t and the proportion of the self-employed in t − 1, providing a new perspective on cross-country productivity convergence over time.