DP3678 Entrepreneurship Capital and Economic Performance
The neoclassical model of the production function, as applied by Robert
Solow to build the neoclassical model of growth, linked labour and
capital to output. More recently, Romer and others have expanded the
model to include measures of knowledge capital. In this Paper we
introduce a new factor, entrepreneurship capital, and link it to output
in the context of a production function model. This Paper explains what
is meant by entrepreneurship capital and why it should influence
economic output. A production function model including several different
measures of entrepreneurship capital is then estimated for German
regions. The results indicate that entrepreneurship capital is a
significant and important factor shaping output and productivity. These
results suggest a new direction for policy that focuses on instruments
to enhance entrepreneurship capital.
