Modelling Entrepreneurship: Unifying the Equilibrium and Entry/Exit Approach

This research report provides a framework for modelling rates of entrepreneurship. The proposed framework may be helpful in separating the effects of a range of different variables, all possibly affecting the rate to which people choose to become or remain self-employed. We unify two approaches with respect to the modelling of the rates of entrepreneurship. The first approach is the 'equilibrium approach', seeking to estimate the long and short-run developments of the number of self-employed. The second approach is the entry/exit approach, seeking to determine the determinants of gross entry and exit rates and their interdependencies. The empirical application to Dutch data indicates how the method works and what sorts of results may be expected.