A new GLO Discussion Paper finds that bad economic conditions when young can significantly predict higher entrepreneurship in later life.
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GLO Discussion Paper No. 850, 2021
Macroeconomic Contractions during Impressionable Years and Entrepreneurship in Later Adulthood – Download PDF
by Sotirakopoulos, Panagiotis & Guven, Cahit & Ulker, Aydogan & Graham, Carol
Author Abstract: We argue that past events experienced during the critical ages of 18-25 can influence an individual’s future entrepreneurship based on the “impressionable years hypothesis”. Accordingly, we empirically investigate the relationship between bad economic conditions during youth and later-life entrepreneurship using Gallup from 2009 to 2014. The identification is achieved through variations across 77 countries and age cohorts born between 1954 and 1989. Our findings indicate that bad economic conditions when young can significantly predict higher entrepreneurship in later life. For example, experiencing at least one economic contraction during youth increases future self-employment/business ownership propensities by about 6/10% at the outcome means. Graduating from college and entering the job market in a bad economy cannot explain our results. Findings are robust to numerous methods of measuring economic contractions and controlling for behavioural measures as well as economic shocks experienced before and after the impressionable years.
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