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

Author

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  • Zuzana Brixiová

    (African Development Bank, IZA and Research Affi liate, SALDRU, University of Cape Town)

  • Mthuli Ncube

    (University of Oxford)

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.

Suggested Citation

  • Zuzana Brixiová & Mthuli Ncube, 2015. "Entrepreneurship and the Business Environment in Africa: An Application to Ethiopia," SALDRU Working Papers 146, Southern Africa Labour and Development Research Unit, University of Cape Town.
    • Handle: RePEc:ldr:wpaper:146
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    References listed on IDEAS

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    1. Brixiová, Zuzana & Ncube, Mthuli & Bicaba, Zorobabel, 2015. "Skills and Youth Entrepreneurship in Africa: Analysis with Evidence from Swaziland," World Development, Elsevier, vol. 67(C), pages 11-26.

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    More about this item

    Keywords

    Model of start-ups; productivity; multiple equilibria; low income countries; Africa;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J48 - Labor and Demographic Economics - - Particular Labor Markets - - - Particular Labor Markets; Public Policy
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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