Technical Change and Entrepreneurship

I document a significant decline in the share of entrepreneurs among US households overthe last three decades. Most of this decline is accounted for by a drop in the share of en-trepreneurs among college graduates. Using a standard entrepreneurial choice model with twoskill groups—high- and low-skill individuals—I then argue that the decline is the outcome oftwo technological forces that increased the returns to high-skill labor: the skill-biased techni-cal change and the decrease in the price of capital. I find that these two forces account forthree-quarters of the decline in the share of entrepreneurs.

Working Paper. R&R AER