1. GEM measures young business owners (individuals), not Young Firm Entrepreneurial Activity ◦ At minimum, you should correct for (average) team size

Lecture preparation: “Read section 5.2.1 of Thai & Turkina (2014) carefully, and try to find at least two errors in the calculation of the national rate of informal entrepreneurship” :

Young business owner defined as someone with a business younger than 3.5 years (“double counting”)

Survival rates increase over time (many fail soon), so adjustment needed

Example slide 21 “To illustrate with an example, Bolivia's total entrepreneurial activity (based on GEM data) as a percentage of its population is 39.4% whereas formal entrepreneurship (based on World Bank data) is only 6.2% of its population. Therefore, informal entrepreneurship constitutes 33.2% of this country's entrepreneurial activity. Both variables are based on 2009 data (the most recent and comprehensive data sets).” ---> Worldbank site: you can see that the new business density (new registration per 1,000 people ages 15-64) is 0.45 in Bolivia (2009) --> If there are 0.45 new business per 1000 individuals, then there are 0.045 new businesses per 100 individuals! remain critical!

1.Factor-driven economies
◦ Economic activity primarily based on the extraction of natural resources

2. Efficiency-driven economies
◦ Industrialization and economies of scale are major drives of economic development

3. Innovation-driven economies
◦ Expanding services sector, and increasing variety and knowledge intensity of the industrial sector

Scale economies (particularly important in efficiency-driven stage of economic
development)

Increase in economic development leads to higher increases of safe wages than entrepreneurial income increases

Notes: with an L-shaped it is not possible more info in book make a big deal about linear and quadratic relationships

• see slides 20-22: Notes "is it U-shaped?" Negative relationship for poor positive relationship for richer countries; most people say the relationship is u-shaped