Abstract

Entrepreneurship and economic inequality share a strong implicit connection in terms of resource allocation, motivation, social mobility, and wealth accumulation to name a few. While there is a long history of exploring the relationship of entrepreneurship in economic theory (inter alia Baumol, 1968; Schumpeter, 1961) there remains a paucity of research situated at the nexus of economic inequality and entrepreneurial activity.

Drawing on the economic development and entrepreneurship literatures we propose an inverted U relationship between entrepreneurship and economic inequality. This relationship suggests that in countries characterized by lower economic inequality there will be a positive relationship between entrepreneurial activities and rising economic inequality. However, in countries characterized by high economic inequality this relationship will be reversed, with lower entrepreneurial activity levels as inequality rises. We also propose that economic inequality will serve to magnify (positively moderate) the relationship between both entrepreneurial attitudes and aspirations and the various forms of entrepreneurial activity.

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