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What’s Driving the Decline in Entrepreneurship?
E23 - Production
E24 - Employment; Unemployment; Wages
J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
Why has there been a steady decline in entrepreneurship in the US in recent decades? To answer this question, I develop a general equilibrium occupation choice model and combine it with data on these choices. Skill-biased technical change can account for much of the decline in the relative entrepreneurship rate of more educated people, but cannot explain the decline in the aggregate level of entrepreneurship. The major factors in the decline in the share of people who are entrepreneurs, the firm entry rate, and the size of the entrepreneur sector are rising entry costs and outsized productivity gains by large non-entrepreneur firms.