The relation between entrepreneurship and economic development: Is it U-shaped?

Following a centuries-long decline in the rate of self-employment, a remarkable discontinuity in this downward trend since the 1970s and 1980s for many advanced economies seems beyond doubt. In some of these countries we even see a downright and ongoing revival of selfemployment. At the same time, cross-sectional analysis shows a significant U-shaped relationship between start-up rates of new enterprises and levels of economic development. In this paper we provide an overview of the empirical evidence concerning the relation between entrepreneurship and economic development. We also argue that the apparent U-shaped relationship is based on at least two 'revolutions'. If we distinguish between solo self-employed at the lower end of the entrepreneurship spectrum, and ambitious and/or innovative entrepreneurs at the upper end, many advanced economies show a revival at both ends. Policymakers should be aware of both developments and can do much to facilitate each of them.