ENTREPRENEURSHIP AND UNEMPLOYMENT: A LITERATURE REVIEW.

Abstract

A great deal of ambiguity exists in the literature over the relationship between entrepreneurship and unemployment. The simple theory of income choice, which has been the basis for numerous studies focusing on decision confronted by individuals to start-up venture and become entrepreneur i.e. the increase in unemployment will lead to an increase in start-up activity (push-effect) on the grounds that the opportunity cost of not starting a venture has decreased. This study aims to contribute to the entrepreneurship literature by exploring the relationship between the two conflicting concepts; entrepreneurship and unemployment. In this paper we reviewed the relationship between entrepreneurship rate and unemployment rate using exploratory research. Furthermore, using secondary data we attempt to address the ambiguity between the two concepts empirically. However, we assumed that increase in entrepreneurship activities reduced unemployment, at the same time, high rate of unemployment lead to slowdown or decrease in entrepreneurial activity in an economy. Using available literature, we tried to justify this notion and reconciled the two conflicting concepts, for policy-makers and researchers as well.