Uncover “Gazelles”: The Macroeconomic Implications of Uncertainty and Learning for Entrepreneurship
by Han Gao and Lichen Zhang
Abstract: To study the role of uncertainty and learning in selection into entrepreneurship at various life stages, we develop a quantitative model of occupational choice under incomplete information and discipline the learning process using novel subjective business forecasts data from U.S. entrepreneurs. Our model rationalizes key observed entrepreneurial life cycle outcomes, including entry and exit dynamics. Informational uncertainty prevents high-potential individuals from discovering their entrepreneurial talents and creating ”gazelles” at young ages, leading to significant output and productivity losses. Quantitative experiments show that policies prioritizing the young by offering insurance for experimentation unveil high-productivity entrepreneurs and improve occupational sorting at earlier life stages, ultimately increasing aggregate entrepreneur share, output, and welfare.