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Entrepreneurship, Institutions and Skills in Low-Income Countries

Author

Listed:
  • Brixiova, Zuzana

    (UNECA)

  • Égert, Balázs

    (OECD)

Abstract
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 pro-business framework and a well-functioning education system.

Suggested Citation

  • Brixiova, Zuzana & Égert, Balázs, 2017. "Entrepreneurship, Institutions and Skills in Low-Income Countries," IZA Discussion Papers 10704, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp10704
    as

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    References listed on IDEAS

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    Cited by:

    1. Ali Hussein Samadi, 2019. "Institutions and entrepreneurship: unidirectional or bidirectional causality?," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 9(1), pages 1-16, December.
    2. Lucía Mateos-Romero & María del Mar Salinas-Jiménez, 2018. "Labor Mismatches: Effects on Wages and on Job Satisfaction in 17 OECD Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 140(1), pages 369-391, November.

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    More about this item

    Keywords

    model of start-ups and strategic complements; institutions; education; low-income countries; threshold regression;
    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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