Creating an Environment for Economic Growth: Creativity, Entrepreneurship or Human Capital?


Scholars and policymakers interested in the growth and prosperity of regions have long recognized that talent and knowledge are fundamental. Yet the question is what types of talent are needed in a growing twenty-first-century economy: human capital, creativity and innovation, or entrepreneurship? The latter we define broadly to include any type of risk taking, and not only radical innovation. The literature does not clearly point to one factor as being the most essential. This study assesses this question separately for rural and urban United States (US) counties. We find that human capital––measured by educational attainment––is considerably more conducive to employment growth than the share of creative occupations. Likewise, the share of small and medium businesses is also very conducive to local growth, although this does not apply to the self-employment share. Rural and urban areas experience similar patterns, although the magnitude thereof tends to be larger for urban counties, whereas high-technology employment share has had a positive effect in rural areas. Policy conclusions suggest that enhancing small business development and increasing educational attainment are the two strategies that are most likely to succeed.