From Rags to Riches How Robust is the Influence of Culture on Entrepreneurial Activity?

From Rags to Riches – How Robust is the Influence of Culture on Entrepreneurial Activity? Christian Busch, Andrea Lassmann November 19th 2009 Entrep...
Author: Allison Allison
4 downloads 0 Views 414KB Size
From Rags to Riches – How Robust is the Influence of Culture on Entrepreneurial Activity? Christian Busch, Andrea Lassmann November 19th 2009

Entrepreneurship and its Determinants 

Determinants of entrepreneurship  Micro-level: age, gender, education, education, etc.  Aggregate level : access to funding, taxes, unemployment, enclaves  Fundamental determinants: Institutions and Culture



Culture is essentially unobservable



„Culture as those customary beliefs and values that ethnic, religious, and social groups transmit fairly unchanged from generation to generation“ (Guiso, Sapienza, Zingales, 2006, JEP)



Survey-based measures difficult to separate from (usually perceptionbased) measures of institutions



Culture assumed to show some persistence November 19th 2009

2

Motivation 

Quasi-experiment of immigration: Differences in self-employment between immigrants from different countries



(Institutional) environment is the same for all immigrants but has changed for each individual



Controlling for self-selection by looking at individual characteristics



Remaining behavioral differences due to individualized and internalized values of their native cultures

November 19th 2009

3

Existing Literature 

For culture to be relevant, self-employment of immigrants should be related to self-employment shares in immigrants’ home countries.



Yuengert (1995): positive relationship



Fairlie/Meyer (1996): correct for U.S. natives-immigrant differences, and find not effect



Akee et al. (2007): positive effect of previous self-employment, but large negative effect of home-region self-empl.



Oyelere/Belton (2009):  Developing countries have higher average self-employment  Immigrants from developed countries have higher probability of being self-employed November 19th 2009

4

Approach 

Puzzling finding of non-existing / negative relationship of immigrant selfemployment with home country self-employment



Differences in immigrant self-employment cannot entirely be explained by observable differences between immigrants



Suggested modifications  Alternative proxy for entrepreneurial activity  Account for adjustment over time  Control for determinants of entrepreneurship in home countries – Proximate causes: unemployment, etc. – Ultimate causes: institutions

November 19th 2009

5

Data 

Logit using immigrant self-employment as dependent variable



U.S. Integrated Public Use Microdata Series (IPUMS 5%) from the year 2000  separate all self-employed and incorporated self-employed  exclude persons 69 years, unemployed  restrict number of US natives to 100’000  1.3 million observations; 108’000 self-employed (~8%); 36’000 inc. (~3%)  include large number of demographic control variables



Home country entrepreneurial activity (ILO)  Share of self-employed on active population  Share of employers on active population  Use different years in order to increase sample

 

Home country determinants of entrepreneurial activity (WDI) Home country institutions: ICRG, AGI

November 19th 2009

6

.8

Self-Employment as a Proxy for Entrepreneurship…

CMR HTI

.6

RWA MDG MDV ETH

GAB BOL PER HND IRNDOM JAM PHL ECU DMA ZMB COL GRC YEM LSO SLV LCA NAM BGD MNG THA LKA CPV PAN MAR BLZ KOR CHL EGY WBGMHL BRA STP MDA GEO ARG TON CRI MEX URY PRT GRD POL TUN TUR ITA ROM MYS TTO CYP NZL IRL ESP HRV SUR LTU NCL CANISL MUS PRIAUS MKD BRB SGP GBR CHE JPN SVN BWA UKR LVA HUNCZE OMN ISR NLD AUT HKG MAC DEU USA DNK NOR RUS SVK EST PAK

.2

.4

KHM VNM

0

ERI

4

6

8 log Income per Capita

10

November 19th 2009

7

.8

… may be Determined by Market Distortions

CMR

.6

HTI

.4

MDV BOL PER

.2 0

DOM JAM IRN

ECU

DMA GRC SLV LCA PAN BLZ KOR CHL WBG ARG BRA URY CRI PRT MEX GRD POL ITA MYS TTO CYP IRL HRV NZL ESP ISL LTU SUR NCL CAN MUS AUS PRI CHE BRB SGP GBR JPN OMN SVN BWA CZE UKR ISR LVA NLD AUT HKG HUN DEU MAC ABW ANT USA DNK NOR SVK RUS EST QAT COL

0

ETH

PAK

20

VNM KHM

HND PHL

MNG NAM LKA

YEM LSO THA

ZMB BGD

EGY MDA GEO TON TUR ROM

40 60 Agricultural share of employment

80

100

November 19th 2009

8

.15

Modification I: Employer Shares as an Alternative Proxy BEL FIN

.1

SWE

NAM

NZL GRC KOR CHE ISL PRT PER SGP CYP WBG IRL HKG AUT HRV PHL SLV MKD ARG ESP ISRDEU AUS COL HND TTO POL CZE URY MDV IRNDOM LVA MUS CMR SVN MAC CHL MAR TUN JPN BRA PAN JAM MYS TUR HUNMEX CPV BOL THA SVK YEM LKA OMN SUR EST ECU

.05

ETH

0

Share of Employers

ITA

4

MNG GEO ZMB PAK LSO MDG MDA STP VNM BGD KHM RWA

6

DMA LTU LCA BLZ GRD CRI

RUS ROM MHL TON

GAB

8 log Income per Capita

BRB

10

November 19th 2009

9

U.S. versus Home Country Self-Employment (b) Employers only

.8

.15

(a) Self-Employment

BEL FIN

HTI

CMR

.1

.6

ITA

NZL

IRN

ECU GRC

.05

KOR

0 0

.05

.1 selfempshare_us Fitted values

.15

selfempshare

GRC

CHE KOR

CRI

0

.2

.4

ETH PAK BOL PER HNDKHMVNM DOM JAM PHL ECU DMA COL SLV LCA BGD THA CPV LKA PAN BLZ MDA MAR EGY CHL GEO ARG TON BRA CRI URY MEX PRT GRD POL ITA TUR ROM MYS TTO CYP IRL NZL ERIESP HRV LTU CAN AUS PRIBRB CHE SGP JPN MKD GBR UKR CZE NLD AUT HKG DEULVA HUN DNK RUSNOR SVK

SWE

.2

PER PRT HKG AUT HRV IRL PHL SLV DEUESP ARG AUS COL HND TTO POL CZE URY DOM CHL MAR JPN BRA PAN JAM MYS TUR HUN MEX BOL THA LKA RUS ROM PAK ETH VNM KHM BGD

.02

.04

.06 incshare_us Fitted values

IRN

.08

.1

employershare

November 19th 2009

10

Modification II: Institutional Adjustment versus Cultural Persistence

November 19th 2009

11

Modification III: Account for Cross-Country Determinants of Entrepreneurship  Approach: Multilevel Analysis; Clustering at the country-level

 Proximate Causes  Income per capita, unemployment, demographic structure, agricultural labour share, distance from equator  Ultimate Cause: Institutions  Complex relationship: Any significant variable indicates cultural (behavioural) persistence  Expect institutions to primarily determine (persistent) behaviour

November 19th 2009

12

Results I: Accounting for Convergence & Home Country Determinants of Entrepreneurship (1) All

(2) < 10 Years

(3) > 10 Years

Unemployment Rate

(4) < 5 Years -0.002

(5) All

(6) < 10 Years

(7) > 10 Years

(0.013)

Share of Employment in Agriculture

Share of Old Population (> Age 65) Share of Young Population (Age 0-14) Latitude (Distance from Equator) Share of Urban Population Log GDP per capita Self-employment share

-0.004

-0.002 (0.008)

-0.039**

-0.037

(0.020)

(0.028)

-0.045***

-0.041**

(0.013)

(0.016)

0.544

0.609

(0.559)

(0.645)

0.001

-0.000

(0.006)

(0.006)

-0.021

-0.107

(0.072)

(0.099)

-0.589

-0.885

-0.54

1.547**

(-1.02)

(1.89)*

(-0.85)

(0.692)

0.15 65 952019

0.13 65 319692

0.16 65 632327

(0.015)

(0.007)

Employer share Pseudo R-squared Number of Clusters Number of Observations

(8) < 5 Years 0.005

0.132 65 159512

6.095

4.417

6.269

3.985***

(2.70)***

(1.92)*

(2.77)***

(1.508)

0.12 60 813559

0.08 60 281738

0.12 60 531821

0.076 60 139148 November 19th 2009

14

Results II: Self-Employment and Institutions International Country Risk Guide

Aggregate Governance Indicators

Expropriation

Rule of Law

Bureaucracy

Contract

Government

Corruption

Regulation

Rule of Law

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

-0.832* (0.458)

-0.826* (0.458)

-0.826* (0.458)

1.725** (0.709)

1.715** (0.709)

1.725** (0.709)

1.725** (0.709)

(A) no home-country control variables

Self-Employment Share

-1.312*** (0.507)

-1.003** (0.457)

-1.003** (0.457)

-1.312*** (0.507)

-0.826* (0.458)

(B) Including home-country control variables Self-Employment Share

0.358 (0.761)

1.429** (0.703)

1.429** (0.703)

0.358 (0.761)

(C) Including Institutions only Self-Employment Share

1.355 (0.943)

0.961 (0.600)

0.144 (0.603)

0.231 (1.308)

0.938 (0.618)

0.913 (0.741)

1.032* (0.621)

0.818 (0.688)

Institution

0.180* (0.109)

0.136** (0.066)

0.326*** (0.097)

-0.126 (0.086)

-0.542*** (0.122)

0.134 (0.087)

-0.156 (0.095)

0.128 (0.107)

(D) Including home-country control variables and Institutions

Self-Employment Share

0.932 (0.738)

1.158* (0.627)

0.776 (0.491)

0.084 (0.884)

1.736** (0.710)

1.499** (0.762)

1.731** (0.737)

1.539** (0.783)

Institution

0.140 (0.101)

0.117* (0.065)

0.311*** (0.080)

-0.071 (0.078)

-0.556*** (0.122)

0.099 (0.070)

-0.036 (0.133)

0.072 (0.088)

Pseudo R-squared Number of Observations Number of Clusters

0.133 147606 54

0.132 153823 60

0.133 153823 60

0.133 147606 54

0.131 159512 65

0.131 159403 64

0.131 159512 65

0.131 159512 65 November 19th 2009

15

Results III: Employers and Institutions International Country Risk Guide

Aggregate Governance Indicators

Expropriation

Rule of Law

Bureaucracy

Contract

Government

Corruption

Regulation

Rule of Law

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

5.071** (2.199)

5.122** (2.196)

5.122** (2.196)

3.891** (1.514)

3.771** (1.517)

3.891** (1.514)

3.891** (1.514)

(A) no home-country control variables Share of Employers

5.540** (2.313)

5.233** (2.212)

5.233** (2.212)

5.540** (2.313)

5.122** (2.196)

(B) Including home-country control variables Share of Employers

2.902* (1.536)

3.853** (1.518)

3.853** (1.518)

2.902* (1.536)

(C) Including Institutions only Share of Employers

4.784* (2.454)

3.609* (1.941)

4.004** (2.004)

4.591** (2.203)

4.293* (2.267)

3.337 (2.194)

4.810** (2.113)

3.403 (2.245)

Institution

0.174 (0.139)

0.161* (0.087)

0.385** (0.150)

-0.160 (0.102)

-0.967*** (0.224)

0.179 (0.135)

-0.267** (0.122)

0.148 (0.163)

(D) Including home-country control variables and Institutions Share of Employers

3.015** (1.503)

3.081** (1.565)

3.348** (1.454)

3.571** (1.621)

3.923** (1.529)

2.962* (1.611)

4.281*** (1.471)

3.172* (1.700)

Institution

0.067 (0.128)

0.131 (0.090)

0.349*** (0.103)

-0.167* (0.091)

-0.990*** (0.222)

0.147 (0.106)

-0.147 (0.134)

0.103 (0.125)

Pseudo R-squared Number of Observations Number of Clusters

0.074 134992 51

0.075 138692 56

0.076 138692 56

0.075 134992 51

0.076 139148 60

0.074 139041 59

0.075 139148 60

0.074 139148 60 November 19th 2009

16

Conclusions 

Crucial differences between proxies



Home country determinants important  Explain why previous studies did not find positive relationship  Change the sign on home country self-employment  Reconcile different influence of both proxies  Home country employers share more robust  Institutions not the main determinant



Unable to reject cultural hypothesis



Remaining problems:  Parameter heterogeneity with respect to income  Lack of explanation about channels of influence November 19th 2009

17

Suggest Documents