Volume 65, Issue 3 pp. 586-602
RESEARCH ARTICLE

Population Ageing and Entrepreneurship: Theory and Evidence From OECD Countries

Rui Zhang

Corresponding Author

Rui Zhang

International School of Economics and Management, Capital University of Economics and Business, Beijing, China

Correspondence: Rui Zhang ([email protected])

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Mengyao Kang

Mengyao Kang

Lee Kong Chian School of Business, Singapore Management University, Singapore, Singapore

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First published: 10 January 2025

ABSTRACT

This paper studies how population ageing affects individuals' choice between entrepreneurship and employment with enterprises. We develop a theoretical model where individuals are different in their entrepreneurial ability. A representative worker integrates the professional status of all workers as: (1) a younger worker, (2) an older worker, and (3) a retiree. Entrepreneurs and workers are required to pay taxes to contribute to the pension fund. We find that a higher proportion of the elderly population leads to a lower proportion of individuals choosing to become entrepreneurs because of a higher tax burden. A higher pension replacement rate also discourages individuals from starting a business. Using data from OECD. Stat, Eurostat, and the World Bank database, our empirical results support the model's predictions.

Conflicts of Interest

The authors declare no conflicts of interest.

Data Availability Statement

The data that support the findings of this study are available from the corresponding author upon reasonable request.

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