ENTREPRENEURSHIP AND ECONOMIC GROWTH

This study was carried out to analyze the relationship between Economic growth and entrepreneurship in Rwanda with the use of the production function to find out the short-term relationship and long-term joint relationship, the causality effect among the variables of the study and proofing the U-shaped relationships between independent entrepreneurs and economic growth. By employing a time series analysis of data imported to the E-views 12, for further analysis from the excel sheet of the World Bank data set of 1991 to 2021 quarterly data of 124 observations. Therefore, the autoregressive distributed lag (ARDL) model is employed to cater the relationship of the determinants of production function which are Capital measured by Gross capital formation (percentage of GDP) (CAP), Entrepreneurship indicated by Self-employed (from total employment) (LENT) and Labor force (LAB) to explain the growth with Real GDP measured in constant year 2015 (GDP) indicator. In fact, the truth shows that the hypothesis of a joint positive long-run relationship of Entrepreneurship to growth is strongly significant. Whereby it has a weak negative midterm effect, by assuming other facts as constant, the 1 percent increase (inelastic) in Entrepreneurship of 1 previous period is associated with a 0.498 increase in growth and a 1 percent increase in Entrepreneurship in the fifth previous period is associated with a 0.528 increase in growth with meaningless negative midterm fluctuation. This shows, that both the long-run and short-run elasticities supports the validity of the U-shaped relationship between economic growth and the rate of entrepreneurship development. the analysis also employed the causality method, and the evidence from the Granger-causality shows the unidirectional causality between Entrepreneurship and Growth, Capital and Growth, and Entrepreneurship and Capital. Which have policy implications for Rwanda, that emphasizing on the joint increase of factors of production with entrepreneurship will raise output with short-term fluctuation. Finally, we conclude that the entrepreneurship indicated by self-employment (independent entrepreneur), jointly with other factors of growth increases output production in the short term and with the limitation of midterm decrease which requires policies to transform start-ups into highly growing firms that leads to effective employment creation, poverty reduction, increase standard of living, increased level of income, and human development. It is also noteworthy that the Rwandan Government promotes entrepreneurship development.