When development finance spurs entrepreneurship: New evidence from 5 million projects using a machine learning classifier

Sven Werner and Philipp Trotter

No 1205, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Development finance increasingly funds entrepreneurship in developing countries, but evidence of its impact on entrepreneurship is mixed. Existing studies analyze total development finance flows as entrepreneurship-specific development finance data did not previously exist. By training and validating a machine-learning classifier on development finance project descriptions (2000-2022; 5 million projects; 97% accuracy), we introduce a scalable, replicable measure of specific entrepreneurship-support development finance (ESDF). Crucially, this measure allows us to assess which entrepreneurship margins respond to development finance. In a 19-year panel of 50 developing countries, two-way fixed-effects regressions show that higher ESDF is associated with higher entrepreneurial intentions, while total development finance is not. ESDF is not significantly linked to early-stage entrepreneurial activity, however, suggesting conversion bottlenecks in current entrepreneurial processes.

Keywords: Entrepreneurship-support development finance; international assistance; entrepreneurial intentions; early-stage entrepreneurship; machine learning classification (search for similar items in EconPapers)
JEL-codes: C23 C45 F35 L26 O19 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:341094

DOI: 10.4419/96973390

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