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

Listed author(s):
  • Brixiova, Zuzana

    ()

    (University of Cape Town)

  • Ncube, Mthuli

    ()

    (University of Oxford)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7553.

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Length: 23 pages
Date of creation: Aug 2013
Handle: RePEc:iza:izadps:dp7553
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  1. repec:cep:stieop:43 is not listed on IDEAS
  2. Ayal Kimhi, 2010. "Entrepreneurship and income inequality in southern Ethiopia," Small Business Economics, Springer, vol. 34(1), pages 81-91, January.
  3. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
  4. International Monetary Fund., 2012. "The Federal Democratic Republic of Ethiopia; Staff Report for the 2012 Article IV Consultation," IMF Staff Country Reports 12/287, International Monetary Fund.
  5. Paloma Lopez-Garcia, 2009. "Business Environment and Labor Market Outcomes in European and Central Asian Countries," Journal of Entrepreneurial Finance, Pepperdine University, Graziadio School of Business and Management, vol. 12(4), pages 35-67, Spring.
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  7. Pinheiro-Alves, Ricardo & Zambujal-Oliveira, João, 2012. "The Ease of Doing Business Index as a tool for investment location decisions," Economics Letters, Elsevier, vol. 117(1), pages 66-70.
  8. Zuzana Brixiova, 2013. "Modeling productive entrepreneurship in developing countries," Small Business Economics, Springer, vol. 41(1), pages 183-194, June.
  9. Faggio, Giulia & Konings, Jozef, 2003. "Job creation, job destruction and employment growth in transition countries in the 90s," Economic Systems, Elsevier, vol. 27(2), pages 129-154, June.
  10. World Bank, 2009. "Ethiopia - Toward the Competitive Frontier : Strategies for Improving Ethiopia’s Investment Climate," World Bank Other Operational Studies 3076, The World Bank.
  11. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
  12. Brixiová, Zuzana & Égert, Balázs, 2012. "Business Environment, Start-Ups, And Productivity During Transition," Macroeconomic Dynamics, Cambridge University Press, vol. 16(S2), pages 213-231, September.
  13. Baliamoune-Lutz, Mina, 2009. "Entrepreneurship and Reforms in Developing Countries," WIDER Working Paper Series 004, World Institute for Development Economic Research (UNU-WIDER).
  14. Oriana Bandiera & Robin Burgess & Narayan Das & Selim Gulesci & Imran Rasul & Munshi Sulaiman, 2013. "Can Basic Entrepreneurship Transform the Economic Lives of the Poor?," STICERD - Economic Organisation and Public Policy Discussion Papers Series 043, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  15. Mulu Gebreeyesus, 2008. "Firm turnover and productivity differentials in Ethiopian manufacturing," Journal of Productivity Analysis, Springer, vol. 29(2), pages 113-129, April.
  16. Mitra, Pradeep & Muravyev, Alexander & Schaffer, Mark E., 2009. "Convergence in institutions and market outcomes: cross-country and time-series evidence from the business environment and enterprise performance surveys in transition economies," Policy Research Working Paper Series 4819, The World Bank.
  17. Bruton, Garry D. & Ketchen, David J. & Ireland, R. Duane, 2013. "Entrepreneurship as a solution to poverty," Journal of Business Venturing, Elsevier, vol. 28(6), pages 683-689.
  18. Jean-Jacques Dethier & Maximilian Hirn & Stéphane Straub, 2011. "Explaining Enterprise Performance in Developing Countries with Business Climate Survey Data," World Bank Research Observer, World Bank Group, vol. 26(2), pages 258-309, August.
  19. Mthuli Ncube, 2005. "Economic Growth, Entrepreneurship and the Business Environment in Africa," Working Papers 30, Economic Research Southern Africa.
  20. Gollin, Douglas, 2008. "Nobody's business but my own: Self-employment and small enterprise in economic development," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 219-233, March.
  21. World Bank, 2007. "Ethiopia - Urban Labor Markets : Challenges and Prospects, Volume 2. Background Paper," World Bank Other Operational Studies 7994, The World Bank.
  22. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
  23. Martins, Pedro, 2014. "Structural change in Ethiopia : an employment perspective," Policy Research Working Paper Series 6749, The World Bank.
  24. Klapper, Leora & Laeven, Luc & Rajan, Raghuram, 2006. "Entry regulation as a barrier to entrepreneurship," Journal of Financial Economics, Elsevier, vol. 82(3), pages 591-629, December.
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