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

Zuzana Brixiová () and Mthuli Ncube ()

No 146, SALDRU Working Papers from Southern Africa Labour and Development Research Unit, University of Cape Town

Abstract: Policymakers in developing countries have recognized that productive entrepreneurship can help eliminate extreme poverty. This paper develops a search model of costly entrepreneurial start-ups under a constraining business environment and skill gaps, where one of the equilibrium outcomes is a low-productivity trap. The model reflects stylized facts from the urban labor markets in low income countries such as Ethiopia where low rates of productive entrepreneurship coexist with high output growth in some sectors. Creating an enabling business environment could help move the economy into the high-productivity equilibrium if the regulatory improvements are substantial and other bottlenecks such as skill gaps addressed. We test the role of the business environment in entrepreneurial sales on data from a recent World Bank survey of enterprises in Addis Ababa.

Keywords: Model of start-ups; productivity; multiple equilibria; low income countries; 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-cse and nep-ent
Date: 2015
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Working Paper: Entrepreneurship and the Business Environment in Africa: An Application to Ethiopia (2013) Downloads
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