Linking Entrepreneurship and Economic Growth in Sweden, 1850–2000

Recent developments in entrepreneurship suggest a causal link between entrepreneurial activity and economic growth: entrepreneurship precedes economic growth. A positive effect from entrepreneurship on economic development in advanced, innovation-driven economies in the most recent decades is often maintained. Self-employment is one of the most common indicators of entrepreneurship. The present study uses very long series of noninterrupted data on self-employment in Sweden (1850–2000). It analyzes the relationship between variations in self-employment and economic growth. For the entire period, variations in self-employment had a significant, instantaneous positive correlation with GDP growth. However, no causal relationship could be discovered: variations in self-employment did not (Granger) cause GDP growth. We discovered a structural break in GDP growth as early as in the year of 1948. Up until 1948, (Granger) causality between self-employment and GDP could not be established for any direction. For the other segment (1949–2000), GDP growth (Granger) caused self-employment growth, but not the other way around. For the period 1949–2000, but not for the previous period, self-employment lagged with respect to GDP growth. Consequently, GDP growth preceded self-employment growth, but self-employment growth did not precede GDP growth. Given that self-employment is a suitable indicator, the empirical results in this study are, in several respects, in disagreement with dominating assumptions in mainstream research. _______________________________________________________________