Do startups in the agricultural sector generate employment in the rest of the economy? : an Arellano-Bond dynamic panel study

By means of an Arellano-Bond dynamic panel data study of Swedish data over 1993-2004, it is concluded that startups in the agricultural and forestry sector may cause startups in the remaining sectors of the Swedish economy. Thus, new entries in the agricultural and forestry sector may lead to dynamic effects, which may lead to employment in completely other sectors of the economy. The agricultural and forestry small-business sector is therefore a very important factor in the quest to reduce unemployment and to increase the economic growth in Sweden. Another important finding, outside of the main purpose of this paper, is that the per capita propensity to start a new firm is significantly higher in rural areas compared to urban areas. Consequently, people in rural areas are more entrepreneurial per capita (in the context of starting new firms) compared to the population living in urban areas. A substantially high fraction of the rural population faces the forced option of unemployment or self-employment. However, fortunately, a disproportionally high share of the rural population chooses the latter alternative.