Re-Evaluating the Relationship Between Economic Development and Self-Employment, at the Macro-Level: A Bayesian Model Averaging Approach.

Ana Rodríguez Santiago

doi:10.9781/ijimai.2022.01.007

Authors

Ana Rodríguez Santiago Universidad de Huelva

DOI:

https://doi.org/10.9781/ijimai.2022.01.007

Keywords:

Bayesian Model Averaging, Entrepreneurship, Macro-level Determinants, Uncertainty, Panel, Employment, Self-employment

Supporting Agencies

The author wishes to thank Emilio Congregado, Jesús Crespo Cuaresma and Concepción Román for many useful discussions. The author would like to thank the guest editor, Antonio Golpe, and two anonymous reviewers for their insightful comments that contributed substantially to the development of this paper. Financial assistance from the Spanish Ministry of Economy and Competitiveness through projects ECO2017-86402-C2-2-R, from Junta de Andalucía through Research Group SEJ-487 (Spanish Entrepreneurship Research Group – SERG) and from Research and Transfer Policy Strategy (Estrategia de Política de Investigación y Transferencia) 2020 of the University of Huelva is gratefully acknowledged.

Abstract

We re-evaluate the relationship between stages of economic development and entrepreneurship, at the macro level. We first conduct a literature review of previous empirical research on cross-country determinants of entrepreneurship in order to put our contribution in perspective. To circumvent problems related to model uncertainty we use Bayesian Model Averaging (BMA) to evaluate the robustness of determinants of economic growth in a new dataset of 117 countries in the 2005-2019 period, allowing fixed effects and investigating the existence of heterogeneity allowing interactions of our focus variable with other regressors. Our empirical analysis then shows that the variation of self-employment rates across countries are mainly determined by variations in the unemployment, the stage of economic development and the variations in labor market frictions. When interactions are taken into account, results confirm that there is a differential effect of labor market frictions in countries with different levels of income. Frictions in labor market may encourage becoming self-employed in richer countries.

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