Working Paper: NBER ID: w23728
Authors: Isaac Ehrlich; Dunli Li; Zhiqiang Liu
Abstract: We model investment in entrepreneurial human capital (EHC) - the representative enterprise’s share of production capacity allocated to investment in innovative industrial and commercial knowledge – as a distinct channel through which firm-specific human capital drives endogenous growth. Our model suggests that institutional factors supporting free markets for goods and ideas, and higher educational attainments of entrepreneurs and workers, enhance endogenous economic growth by augmenting the efficiency of investment in EHC rather than exclusively by themselves. We test these implications using data from Global Entrepreneurship Monitor’s Adult Population Survey of 63 countries over 2002-2010 and find robust support for these hypotheses.
Keywords: entrepreneurial human capital; economic growth; endogenous growth; innovation; institutional factors
JEL Codes: L26; O31; O43
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Institutional factors (D02) | Investment in entrepreneurial human capital (EHC) (J24) |
| Human capital endowment (J24) | Investment in entrepreneurial human capital (EHC) (J24) |
| Investment in entrepreneurial human capital (EHC) (J24) | Economic growth (O49) |
| Higher educational attainments of entrepreneurs (D29) | Investment in entrepreneurial human capital (EHC) (J24) |
| Institutional factors supporting free markets (P10) | Economic growth (O49) |
| Accumulated stock of EHC (E01) | Productivity growth (O49) |
| Investment in entrepreneurial human capital (EHC) (J24) | Share of production capacity allocated to innovative entrepreneurship (O35) |
| Share of production capacity allocated to innovative entrepreneurship (O35) | Long-term economic growth (O49) |