Wasted on the Young? Aging and Entrepreneurial Activity, Opportunity, and Skill

How does population age structure affect the rate of nascent entrepreneurship? Demographic change has been proposed as a cause of declines in new business creation. In cross-country data, I study the relationship between underlying population age and entrepreneurial behavior and perceptions. Consistent with past findings, nascent entrepreneurship is positively related to young working age populations. In hopes of uncovering something about the mechanisms behind this relationship, I study demographic effects on entrepreneurial opportunity, skill, and fear of failure. There are strong correlations between age-structure and self reported entrepreneurial skill, with young economies reporting lower levels, but I find only weak connections to opportunity and fear of failure. This evidence seems at odds with theories of age related entrepreneurship, which suggest that young workers have high opportunity, while the old have high skill. Further, reported business exits are lower for younger working-aged populations, suggesting that lower skills are not negatively affecting entrepreneurial success. I describe how these country level age profiles line up with existing theories for demographic declines in entrepreneurship, suggesting that population factors affecting macroeconomic conditions may be a more plausible channel than compositional effects arising from life-cycle characteristics of entrepreneurs