Entrepreneurship, institutions and skills in low-income countries / Zuzana Brixiová (University of Cape Town and IZA), Balázs Égert (OECD, University of Paris X-Nanterre and CESifo) ; IZA, Institute of Labor Economics
VerfasserBrixiova, Zuzana ; Égert, Balázs
KörperschaftForschungsinstitut zur Zukunft der Arbeit
ErschienenBonn, Germany : IZA Institute of Labor Economics, April 2017
Elektronische Ressource
Umfang1 Online-Ressource (22 Seiten) : Diagramme
SerieDiscussion paper ; no. 10704
 Das Dokument ist öffentlich zugänglich im Rahmen des deutschen Urheberrechts.
Entrepreneurship, institutions and skills in low-income countries [0.8 mb]
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This paper develops a model of costly firm creation in an economy with weak institutions, costly business environment as well as skill gaps where one of the equilibrium outcomes is a low-productivity trap. The paper tests the implications of the model using a cross-sectional dataset including about 100 countries. Both theoretical and empirical results suggest that to move the economy into a productive equilibrium, complementarity matters: reforms to improve the business environment tend to be more effective in creating productive firms when accompanied by narrowing skill gaps. Similarly, more conducive business regulations amplify the positive impact on firm creation of better education and reduced skill mismatches. To escape a low-productivity trap, policymakers should thus create a probusiness framework and a well-functioning education system.