Declining Entrepreneurship not a Concern

Says K@W Study

Why Declining Entrepreneurship in the U.S. Is Not a Concern  in K@W

Innovation Content

Entrepreneurship in the U.S. has declined in recent decades because high-skilled college graduates have found that they can earn more in well-paying jobs than starting their own business. Cheaper capital and lower prices of capital goods also helped businesses become more profitable and therefore increased their ability to hire high-skilled workers who would otherwise have become entrepreneurs.

Those “technological improvements have changed the incentives of individuals to start their own business,” according to a new research paper by Wharton finance professor Sergio Salgado titled “Technical Change and Entrepreneurship.” They are responsible for three-quarters of the decline in entrepreneurship, the paper noted.

In identifying those factors, Salgado’s research findings have brought a new understanding to the debate on the decline in U.S. entrepreneurship. Various studies have thus far held that new business formation has declined because of high startup costs or other frictions, labor supply constraints, and the aging of the U.S. population, Salgado’s paper noted. For instance, a recent Congressional Budget Office report blamed the fall in business formations on reduced access to finance and labor markets, and regulatory constraints.  ... '