Policy levers can strengthen incentives for entrepreneurship and improve the likelihood of successful new business startups
No doubt there are a host of country-specific explanations for the varying rates of decline in entrepreneurship. However, the fact that all industrialized countries are experiencing population aging - at the same time entrepreneurship is declining - underscores the potential adverse effects of demographic changes on entrepreneurship.
While there’s little that governments can do to stem populations aging, a number of policy levers are available to strengthen incentives for entrepreneurship and improve the likelihood of successful new business startups. A recent set of essays by leading scholars in Canada, the U.S. and Europe explored possible policy reforms to promote and improve entrepreneurship.
Key among potential policy reforms is tax relief, both in the form of reductions in marginal tax rates for individuals and businesses, and reductions (or even the elimination) of capital gains taxes. These reforms were broadly determined to strengthen the incentives for people to start and grow businesses (i.e. take risks) and expand the pool of entrepreneurial capital.
Other key potential reforms include reducing red tape to make it easier to start new businesses and grow existing ones, changes to banking and financial regulations that would make it easier for entrepreneurs to access the financial capital needed to start and grow their businesses, and policies encouraging increased immigration of individuals with skills and other attributes that make them potential entrepreneurs.
Moreover, improving educational programs that help build entrepreneurial skills, and strengthening networks connecting universities to businesses and researchers in other institutions, could also increase the supply of entrepreneurial talent.
Finally, in one of the set’s more provocative essays, noted economists Deirdre McCloskey and Art Carden explored the positive effects of a culture that values and promotes enterprise and entrepreneurship, as opposed to disparaging such activities. The importance of their essay can’t be overstated given the recent anti-business rhetoric in Canada and many other industrialized countries.
The various policy initiatives to encourage entrepreneurship put forth by scholars in the essay series apply to different countries in varying degrees. It’s clear, however, that developed countries, including Canada, face a long-term decline in entrepreneurship that is at least partially driven by demographics.
Since demographic trends can’t be easily reversed, countries will have to improve the environment in which entrepreneurs and businesses operate to encourage more and better entrepreneurs. -TROYMEDIA