Cohort, Age and Business Cycle Effects in Entrepreneurship in Latin America

Abstract

Abstract How the entrepreneurship rate changes with age and the business cycle has been theoretically and empirically studied. On the other hand, cohort effects have been mostly neglected in the literature. Cohort effects are intrinsic generation characteristics that follow individuals over their lifetime and the business cycles. We propose a methodology to differentiate between age, time (business cycle) and cohort effects in entrepreneurship. We find that time effects are highly correlated with GDP growth. Age effects show and inverse U shaped with maximum between 40 and 50 years. In Brazil, Mexico and Uruguay we find decreasing entrepreneurship in younger cohorts, and almost no change in Peru and Chile.