Entrepreneurship and Growth

Skopje, MacedoniaTuesday, April 21

Free Market Road Show

Dr. Kathleen Sheehankate.m.sheehan@gmail.com

Economic Growth

• Land• Labor • Capital

• Entrepreneurship!

Entrepreneurship

• An entrepreneur is someone who organizes, manages, and assumes the risks of a business

• Entrepreneurship is the process of discovering new ways of combining resources

Entrepreneurship

• Entrepreneurship, not government, for job creation– Helps both entrepreneurs and workers

• Entrepreneurship, not government, for economic growth

Economic Freedom

• To have policies consistent with economic freedom– Personal choice– Voluntary exchange– Property rights – Ability to enter and compete in markets

Economic Freedom and Income per Capita

Economic Freedom and Economic Growth

Economic Freedom

• Low taxes, tariffs, and low barriers to international trade

• Stable monetary policy• Secure protection of property rights• Sound independent legal system• Market process to allocate goods

Economic Freedom

Macedonia

• 72 out of 152 countries – Size of government, ranked 104 (score 5.8)– Legal System and Property Rights, ranked 80

(score 5.4)– Sound Money, ranked 83 (score 8.2)– Trade, ranked 42 (score 7.7)– Regulation, ranked 20 (score 8.1)

Negative Reformers Minor Reformers0.00

0.50

1.00

1.50

2.00

2.50

3.00

Average GDP Per Capita Growth - Europe - 2006-2012

Change in EWF Summary Score, 2006-2012

Average GDPPer Capita

Growth Rate

Institutions that lead to wealth

• Not all forms of entrepreneurship lead to wealth– Unproductive or destructive entrepreneurship• Rent Seeking, Corruption, Organized Crime

Doing Business

• Aggregate ranking on ease of doing business – Examines regulations that apply to medium and

small enterprises

Doing Business

Shadow Economy

• People enter the shadow economy when they feel overburdened by the state – Estimated 35% of GDP in Macedonia– Growing since first measured in 2001

Institutions that lead to wealth

• Productive entrepreneurship– Leads to innovation and technological change – This is what leads to long term growth!

Institutions that lead to wealth

• Simple rules to follow

• Clear property rights enforcement

Youth Unemployment

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

Euro areaMacedoniaEastern Europe

Economic Freedom

Entrepreneurship and Growth

Skopje, MacedoniaTuesday, April 21

Free Market Road Show

Dr. Kathleen Sheehankate.m.sheehan@gmail.com