Entrepreneurship and Long-Run Income Levels in OECD Countries: The Moderating Roles of Financial Development, Human Capital, Innovation, and Institutional Quality

This study examines the long-run association between entrepreneurship and real GDP per capita in 37 OECD economies over 2005 to 2024. The dependent variable is the natural logarithm of real GDP per capita in levels, so the estimated parameters describe long-run income levels rather than growth rates. The analysis asks whether four structural conditions, namely financial development, human capital, innovation capacity, and institutional quality, moderate the entrepreneurship–income relationship, and it tests each moderation through an explicit mean-centred interaction term. The empirical strategy addresses cross-sectional dependence and slope heterogeneity directly: Pesaran CD and Pesaran–Yamagata tests precede CIPS second-generation unit root tests, Westerlund error-correction cointegration tests, and long-run estimation by CCEMG and AMG alongside FMOLS, DOLS, and the Panel ARDL Pooled Mean Group estimator. Entrepreneurship is positively and significantly associated with long-run income per capita across all estimators. The moderating roles of financial development and human capital are positive and robust, the moderating role of innovation capacity is positive but weaker, and no reliable moderation by institutional quality is detected. Dumitrescu–Hurlin tests indicate bidirectional causality between entrepreneurship and income, so the results are interpreted as robust long-run associations rather than identified causal effects. The findings support integrated policy designs that combine entrepreneurial support with financial deepening and human capital formation.