Thursday, September 25, 2014

Secular Stagnation: "Study: Older societies have less entrepreneurially dynamic economies"

Pethokoukis at AEIdeas:
Something to consider when thinking about a pro-innovation economic agenda. From “Demographics and Entrepreneurship” by James Liang, Hui Wang, and Edward Lazear
Entrepreneurship requires creativity and business acumen. Creativity may decline with age, but business skills increase with experience in high level positions. Having too many older workers in society slows entrepreneurship. Not only are older workers less innovative, but more significant is that when older workers occupy key positions they block younger workers from acquiring business skills. A formal theoretical structure is presented and tested using the Global Entrepreneurship Monitor data. The results imply that a one-standard deviation decrease in the median age of a country increases the rate of new business formation by 2.5 percentage points, which is about forty percent of the mean rate. Furthermore, older societies have lower rates of entrepreneurship at every age.