Entrepreneurs, professionals, and growth

We examine the implications for growth and development of the existence of two types of human capital: entrepreneurial and professional. Entrepreneurs accumulate human capital through a work-experience intensive process, wher eas professionals' human capital accumulation is education-intensive. Moreo ver, the return to entrepreneurship is uncertain. We show how skill-biased technological progress leads to changes in the composition of aggregate hum an capital; as technology improves, individuals devote less time to the acc umulation of human capital through work experience and more to the accumula tion of human capital through professional training. Thus, our model explai ns why entrepreneurs play a relatively more important role in intermediate- income countries and professionals are relatively more abundant in richer e conomies. It also shows that those countries that initially have too little of either entrepreneurial or professional human capital may end up in a de velopment trap.