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26 Cato J. 525 (2006)
Creating a Policy Environment for Entrepreneurs

handle is hein.journals/catoj26 and id is 531 raw text is: CREATING A POLICY ENVIRONMENT FOR ENTREPRENEURS Thomas A. Garrett and Howard J. Wall Entrepreneurship is often viewed as a catalyst for economic growth. Through innovation, hard work, and a willingness to accept financial risk, the entrepreneur takes advantage of previously undis- covered opportunities for arbitrage and profit (Kirzner 1997).' This quest for profit, and the possibility of personal and financial failure, aid in ensuring that an economy's resources are used efficiently. Suc- cessful entrepreneurs provide employment opportunities to others, generate innovation, spur economic growth, and contribute to state and local governments in the form of tax revenue (Gwartney, Hol- combe, and Lawson 2004; Kreft and Sobel 2005). Because of this perception of the benefits generated by entrepreneurship, a large literature has focused on the factors that influence the decision of an individual to become an entrepreneur and the conditions under which entrepreneurship prospers. Previous research on entrepreneurship has examined the roles of various demographic, human capital, and financial considerations in the decision to become an entrepreneur. Rees and Shah (1986), Gill (1988), and Hamilton (2000) stressed the importance of the earnings differential between entrepreneurship and paid employment. Liquid- ity constraints on entrepreneurship were addressed by Evans and Jovanovic (1989), Evans and Leighton (1989), and Holtz-Eakin, Joulfaian, and Rosen (1994a, 1994b). Personal and job satisfaction Cato Journal, Vol. 26, No. 3 (Fall 2006). Copyright © Cato Institute. All rights reserved. Thomas Garrett is a Research Officer and Howard Wall is an Assistant Vice President, both at the Federal Reserve Bank of St. Louis. The views expressed are the authors' alone and do not necessarily reflect the views of the Federal Reserve Bank of St. Louis or the Federal Reserve System. The authors thank seminar participants at West Virginia University, Stephan Weiler, and participants at the July 2005 Western Economic Association International confer- ence for their helpful comments and suggestions. 'Blanchflower (2004) casts doubt on this supposition, finding a negative relationship be- tween a country's growth and its rate of self-employment. 525

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