2006–2010

Entrepreneurship and the Welfare State. A Reply

Reprint No. 2006:11

Author(s): Magnus HenreksonYear: 2006 Title: Industrial and Corporate Change Volume (No.): 15 (3) Pages: 579–593


It is widely recognized that the supply of entrepreneurial talent is likely to be important for economic growth, innovation, and job creation. In Henrekson (2005, Industrial and Corporate Change, 14(3), 437-467), it was shown that the supply of productive entrepreneurship is likely to be reduced by the kind of tax and welfare arrangements that prevail in a mature welfare state. Welfare state institutions developed mostly during a period when it was common among politicians and economists to assume that individual entrepreneurship and new firms were of minor importance. However, in an environment where entry, exit, and turnover of firms are important for growth, and where scale economies are less important, this kind of model may be more problematic. There are a number of measures that can be implemented to strengthen entrepreneurial incentives within extensive welfare states, but their implementation is unlikely because there are strong vested interests, including the incumbent business elite, defending the current model.

A number of objections against this analysis have been raised by James K. Galbraith and Ronald Dore in the previous issue of Industrial and Corporate Change. In this reply, it is shown that these objections are either largely unfounded or just misunderstandings.


Reference:
Henrekson, Magnus (2006), "Entrepreneurship and the Welfare State. A Reply". Industrial and Corporate Change 15(3), 579–593.

Magnus Henrekson

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Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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