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Entrepreneurship and the Business Environment in Africa: An Application to Ethiopia

Zuzana Brixiová () and Mthuli Ncube ()

No 7553, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Since mid-2000s, Ethiopia has been one of the fastest growing countries in the world. However, productive entrepreneurship in high-value added activities has made limited contributions to this growth, in part because of a weak business environment. Moreover, the low-productive firms in the informal sector still account for a large share of employment. Reflecting these facts, this paper presents a model of costly entrepreneurial start-ups in an economy with a large informal sector and rigid business environment where an equilibrium outcome can be a low-skill, low-productivity trap. By fostering productive start-ups and skilled employment, creation of an enabling business environment could help move the Ethiopian economy into high-productivity equilibrium.

Keywords: entrepreneurship; SME start-ups; low productivity trap; multiple equilibria; Africa (search for similar items in EconPapers)
JEL-codes: L26 J24 J48 O17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr, nep-ent, nep-iue and nep-sbm
Date: 2013-08
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Working Paper: Entrepreneurship and the Business Environment in Africa: An Application to Ethiopia (2015) Downloads
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