Nexus between Entrepreneurship and Economic Growth: A Case Study of Pakistan

Abstract

This study examines the association between entrepreneurship and economic growth in case of Pakistan. This study utilizes time series data over the period of 2006 to 2022 and employs Autoregressive Distributed Lag (ARDL) model. To analyze the association, study uses the registration of new businesses as a proxy for entrepreneurship. The long-run results indicate that entrepreneurship and FDI have no significant effect on economic growth, while employment shows a marginally positive impact. In the short run, lagged GDP growth is highly significant. Entrepreneurship displays a negative and significant effect on GDP with a one-period lag, though its current values are not significant. FDI has a short-term negative effect but becomes positive over time, suggesting delayed economic benefits. Employment shows a positive and significant short-run influence, but lagged values turn negative. The error correction term is negative and significant, confirming the existence of a stable long- term equilibrium among the variables. The study recommends strengthening Pakistan’s entrepreneurial ecosystem, improving institutional quality, expanding financial access for startups, and investing in human capital and innovation to enhance economic growth through entrepreneurship.