Cultural transmission and persistence of entrepreneurship

G. Olcina, E.M. Tur (Corresponding author), L. Escriche

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

This paper contributes to explain the persistence of differences in levels of entrepreneurship within and across countries. We provide an explanation based on the dynamic interplay between purposeful intergenerational transmission of preferences for entrepreneurship and public administration efficiency. Individuals vote on taxes, and the collected taxes fund the civil servants’ wages. The performance of the administration generating an efficient normative and regulatory environment, affects the success of entrepreneurship. We show that an economy can reach two different long-run equilibria: a traditional equilibrium, with a low proportion of entrepreneurs, high taxes and an inefficient administration and, an entrepreneurial equilibrium with a high proportion of entrepreneurs and, lower taxes but enough to implement an efficient administration. The equilibrium achieved depends on the tax policy followed by the different generations. If decisions are made by majority voting in a myopic way, then the initial conditions of the society become crucial. This result explains persistence: an economy evolves around similar levels of entrepreneurship unless some reforms are implemented.

LanguageEnglish
JournalSmall Business Economics
DOIs
StateAccepted/In press - 1 Jan 2018

Fingerprint

Persistence
Tax
Cultural transmission
Entrepreneurship
Entrepreneurs
Proportion
Intergenerational transmission
Civil servants
Regulatory environment
Majority voting
Wages
Long-run equilibrium
Vote
Initial conditions
Tax policy
Public Administration

Keywords

  • Cultural transmission
  • Entrepreneurial preferences
  • Entrepreneurship
  • Public administration efficiency
  • Tax policy

Cite this

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Cultural transmission and persistence of entrepreneurship. / Olcina, G.; Tur, E.M. (Corresponding author); Escriche, L.

In: Small Business Economics, 01.01.2018.

Research output: Contribution to journalArticleAcademicpeer-review

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