Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90105
Authors: 
Brixiova, Zuzana
Ncube, Mthuli
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Paper 7553
Abstract: 
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.
Subjects: 
entrepreneurship
SME start-ups
low productivity trap
multiple equilibria
Africa
JEL: 
L26
J24
J48
O17
Document Type: 
Working Paper

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