Entrepreneurs local amenities and growth a research proposal
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Entrepreneurs, Local Amenities and Growth: A research proposal. Rodrigo Wagner December 1 st , 2008. (De)motivating evidence about negative “growth”. One out of five countries had their peak GDP per capita before 1985. Below the historical peak….

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Entrepreneurs, Local Amenities and Growth: A research proposal

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Entrepreneurs local amenities and growth a research proposal

Entrepreneurs, Local Amenities and Growth:A research proposal

Rodrigo Wagner

December 1st , 2008


De motivating evidence about negative growth

(De)motivating evidence about negative “growth”


One out of five countries had their peak gdp per capita before 1985

One out of five countries had their peak GDP per capita before 1985


Below the historical peak

Below the historical peak…


10 of the world live in countries that forgot their tfp

10% of the world live in countries that “forgot” their TFP

  • 600 million people live in countries

    • where GDP today (2000) is below its 1984 peak.

    • This isn’t small potatoes

  • Questions

    • Why some countries are poorer today than 20 years ago ?

    • How can this happen in a world where technology is growing ?

    • Why some countries take so much time to recover from collapses ?

      • Unlike Germany after WWII

  • Approach:

    • Look at the role of entrepreneurial talent leaving the country


Some usual suspects

Some usual suspects ?

Y = A f(k,h)

  • A in the world in higher

  • Barriers to k

  • Overall investment in h is higher.

  • Infrastructure can be rebuilt…

    • And then pay the cost

  • If shadow price of capital (physical or human) is high  One may import it…

  • In general, true for any (tradable) input

  • Conflict ends… but GDP crisis does not

  • There seems to be a permanent loss in TFP

    - hysteresis


This channel

This channel…

  • Crisis induces reduction in amenities

    • Public security, for example

      2) Entrepreneurs exit the country (or the area):

      V(stay local, w) < V(live in “Miami”, w - Cost of moving)

      3) Conflict stops, but “coordinators” are not there…

    • It takes a while to build a new pool of entrepreneurs


Some micro evidence

Some micro evidence

  • Kidnapping of businessmen reduced investment in Colombian provinces.

    • Pshisva and Suarez (2006)

  • Russian cities disproportionally hit by the Holocaust grew less.

    • Acemoglu, Hassan and Robinson (2008)

  • Entrepreneurship is (very) imperfectly tradable

    • Many local entrepreneurs in Italy

      • Olmo & Michelacci (2004, REStat)

  • African migration … (and return ?)

    • Anecdotal evidence of recent return

      (article in EL PAIS)


  • Macro perspective

    Macro perspective

    • Talent and allocation of talent

      • Lucas (1978) ; Murphy Shleifer & Vishny (1991).

      • But talent is implicitly tradable

  • Entrepreneurs demand educated people.

    • Dias & McDermontt (2006).

  • Talent and tolerance for delayed gratification emerge from the middle class

    • Acemoglu & Zilibotti (1997)

  • Endogenous migration and growth

    • But here human capital does not depreciate when you leave

      • Braun (1993)

  • Familiarity with foreign economy

    • Goodfriend and McDermontt (1998)


  • Central claims

    Central claims

    • Location decisions of entrepreneurs impact the set of available projects.

    • Outward migration of the “entrepreneurial class” reduce long term growth.

      • Why ? Less projects  less spillovers…

    • Restoring amenities for entrepreneurs may attract people able to run businesses.


    Towards a model

    Towards a Model


    Conclusions

    Conclusions

    • Some countries are poorer than before

    • In a world of technological improvement.

    • Did they loose their ability to do business ?

    • Evidence supporting imperfect substitution between local and foreign entrepreneur…

    • How to model ?

    • How relevant ?


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