The Culture of Entrepreneurship

Transcription

1 The Culture of Entrepreneurship Shankha Chakraborty University of Oregon with Jon Thompson (UO) & Etienne Yehoue (IMF) ABCDE, June 2-3, 2014

2 Two Themes Colonization as a preference shock Does culture matter? 2

3 Cultural Determinism Weber ( ): Pro-capitalist values of hard work, thrift, wealth accumulation Empirical evidence: Calvinists in Europe, Chinese in SE Asia, Lebanese in W Africa, Indians in E Africa Tabellini (2012): Trust, respect for others, confidence in individual self determination all strongly correlated with present-day regional development in Europe Gorodnichenko and Roland (2013): Individualism, compared to collectivism, has significant effect on output per worker, productivity, innovation intensity 3

4 Case for Skepticism Culture is endogenous, responds to the environment Weber on China (1951), India (1958): Confucian values and the spirit of the caste system to see your men at work made me feel that you are a very satisfied easy-going race who reckon time is no object impossible to change the habits of national heritage (1915 report on Japan) Empirical evidence on the level of development Room for theory: When does culture matter, when does it not? Anti-entrepreneurial bias, colonization 4

5 Baseline Model 2 broadly-defined occupations: entrepreneurship, paid employment Business capital and labor complementary in production 2 period OLG: childhood and adulthood, constant population Risk neutral, expected return depends on human capital Children born without defined traits Adults differ in human capital endowments x nt acquired from parents Occupational bias acquired from work experience 5

6 Baseline Model Business capital inalienable, risky (Jovanovic-Nyarko, 1996) h i! z nt k = a n k 2 1 q nt nt where q nt = n + nt and nt N(0, 2 ) Normal prior about with Et k ( n ) and n Optimal business decision Economy starts with 2 priors {x n, x n } k nt = E k t ( n ) V k t ( n ) x k nt Entrepreneurs learn over time through Bayesian updating, workers stuck at x n No scope for learning when n is completely mastered, x k nt! 0 6

7 Cultural Transmission Paternalistic parent directs effort towards educating child using own payoff (Bisin-Verdier, 2000) Biased about own occupation, more for paid employment Colonial public education focused on training civil servants, redefined notions of status and success Stabilization and the creation of a working class Amplified by post-colonial policies: statism, public sector Inalienability of business expertise also biases this When socialization fails, child randomly matched to a cultural parent 7

8 Culture and Development Economy grows for a while, reaches no-growth steady state when technology is perfectly mastered Steady-state supply of entrepreneurs inefficiently low if Entrepreneurship involves significant human capital Bias against risk-taking especially high Public sector employment amplifies all of this Cultural bias slows convergence Higher transmission intensity, inertia Lower output per worker: Africa, India, Tokugawa-era Japan 8

9 Choice of Technologies Entrepreneur can choose s to upgrade to a high return high risk technology h i! zn+s,t k = a n+s k 2 1 q n+s,t n+s,t!!! where n+s = s/2 n + s, s N(0, 2 ), 2 (0, 1), transferability of expertise across technologies Assume s 2{0, 1}, solve for dynamic equilibrium where n always used Occurs despite access to technologies if a relatively small 9

10 Aggregate Productivity Shock Permanent shock such that a " : top-down development All technologies benefit, newer ones benefit more Entrepreneurs high expertise x n =0in n transfers as easily as before to n +1 but returns are now higher They keep upgrading and learning: x k t! x > 0 Wages, business income, output per worker grow at in BGP Pro-capitalist cultural change: supply of entrepreneurs rise, Japan, S Korea Culture has a level effect a 1 10

11 Human Capital Shock Suppose instead #: overtaking Incumbent entrepreneurs expertise in existing technologies do not transfer easily, little incentive to switch Wage workers see higher returns from entrepreneurship even though their business knowledge is no better than their parents Mobility: middle-class entrepreneurs enter the business world using newer technologies, keep upgrading, eventually dominate Steady-state growth a 1 from a larger pool of entrepreneurs Post-liberalization India Again a level effect 11

12 Culture and Growth Same society that was held back by culture experiences growth and cultural change when opportunities arise Culture matters for growth only if technological change is nondrastic, always for development Long reach of colonization through a cultural channel: India, Africa Forcible change: Japan, S Korea, India Growth limited by opportunities, culture can adapt Larger shock needed when cultural inertia is higher Caveat: not a general theory of culture or cultural change 12