Technology, Entrepreneurs, and Firm Size

Abstract

We analyze Schumpeterian entrepreneurship within a general equilibrium model of a competitive economy patterned after Lucas. All individuals have access to exogenously growing knowledge. Those who acquire sufficient knowledge become entrepreneurs. If learning is only a function of ability, the faster the progress, the fewer the entrepreneurs, and the higher their pay relative to workers' wages. If knowledge is only a function of lifetime, the faster the progress is, the earlier the entry will be into the entrepreneurial group. When age and ability are considered together, the individuals (if any) who become entrepreneurs with faster progress are younger and more able than those (if any) who drop out of the group.