This article estimates two unobserved components models to explore the macrodynamics of entrepreneurship in Spain and the USA. We ask whether entrepreneurship exhibits hysteresis, defined as a macrodynamic structure in which the cyclical component of entrepreneurship has persistent effects on the natural rate of entrepreneurship. We find evidence of hysteresis in Spain, but not the USA, while in Spain business cycle output variations significantly affect future rates of entrepreneurship. The article discusses implications of the findings for the design of entrepreneurship policies.
This article has benefited from the comments and suggestions of the editor and two anonymous referees. The usual disclaimer applies. We also would like to thank José María Bravo, Silvestro Di Sanzo, Alicia Pérez, and Manuel E. Gegundez for helpful comments on earlier versions of the article.
- unobserved components model
- time series models
- business cycles