In post-Soviet countries, well-functioning institutions are needed to foster productive entrepreneurial development and growth
Since the collapse of the Soviet Union, the differing impact of institutions on entrepreneurship development is undeniable. Several post-Soviet countries benefitted from early international integration by joining the EU, adopting the euro, and becoming OECD members. This process enabled entrepreneurship to develop within institutional contexts where democratic and free market principles were strengthened. In general, however, post-Soviet economies continue to be characterized by higher levels of corruption, complex business regulations, weak rule of law, uncertain property rights and often, lack of political will for institutional change.
Digital payments can effectively connect
entrepreneurs with banks, employees, suppliers, and new markets
Digital payment systems can conveniently and
affordably connect entrepreneurs with banks, employees, suppliers, and new
markets for their goods and services. These systems can accelerate business
registration and payments for business licenses and permits by reducing
travel time and expenses. Digital financial services can also improve access
to savings accounts and loans. Electronic wage payments to workers can
increase security and reduce the time and cost of paying employees. Yet,
there are challenges as many entrepreneurs and employees lack bank accounts,
digital devices, and reliable technology infrastructure.
New businesses are essential to keep
unemployment low, but start-ups need loans in order to create jobs
Entrepreneurship is essential for a healthy
labor market. Recent evidence shows that young businesses (at most ten years
old) have, on average, accounted for all of US employment growth over the
past few decades. New businesses are especially important for youth
employment. However, these businesses tend to borrow a lot, and the credit
constraints they face limit their ability to create jobs. Historically, much
of the discussion regarding the economic importance of entrepreneurship has
focused on small businesses. Empirical evidence increasingly suggests that,
among small businesses, those that are young create the most jobs.
The type, quality, and quantity of
entrepreneurship are influenced significantly by corporate income
taxes—though only slightly
Corporate income taxation influences the
quantity and type of entrepreneurship, which in turn affects economic
development. Empirical evidence shows that higher corporate income tax rates
reduce business density and entrepreneurship entry rates and increase the
capital size of new firms. The progressivity of tax rates increases
entrepreneurship entry rates, whereas highly complex tax codes reduce them.
Policymakers should understand the effects and underlying mechanisms that
determine how corporate income taxation influences entrepreneurship in order
to provide a favorable business environment.
Business ownership is higher among immigrants,
but promoting self-employment is unlikely to improve outcomes for the less
Immigrants are widely perceived to be highly
entrepreneurial, contributing to economic growth and innovation, and
self-employment is often viewed as a means of enhancing labor market
integration and success among immigrants. Accordingly, many countries have
established special visas and entry requirements to attract immigrant
entrepreneurs. Research supports some of these stances, but expectations may
be too high. There is no strong evidence that self-employment is an
effective tool of upward economic mobility among low-skilled immigrants.
More broadly prioritizing high-skilled immigrants may prove to be more
successful than focusing on entrepreneurship.
The right policies can help the self-employed to boost
their earnings above the poverty level and earn more for the work they do
A key way for the world’s poor to escape poverty is to earn
more for their labor. Most of the world’s poor people are self-employed, but because
there are few opportunities in most developing countries for them to earn enough to
escape poverty, they are working hard but working poor. Two key policy planks in the
fight against poverty should be: raising the returns to self-employment and creating
more opportunities to move from self-employment into higher paying wage employment.
Harnessing the benefits of diversity is essential for
encouraging entrepreneurship in the transition region
Entrepreneurship is an important lever for spurring transition
in the economies of the former Soviet Union and Central and Eastern Europe. Utilizing
diversity, in terms of religion or gender, can positively affect entrepreneurial development.
Programs that encourage entrepreneurial initiatives (such as business start-ups) in culturally
diverse localities should rank high on the policy agenda. Prompting women to start a business,
along with female-friendly measures (including targeted legislation), can positively affect
entrepreneurial behaviour and the performance of existing enterprises.
Moonlighting responds to economic needs, but can
generate new skills and careers
Multiple job-holding, or “moonlighting,” is an
important form of atypical employment in most economies. New forms of work,
driven by digitalization, may enable its future growth. However, many
misconceptions exist, including the belief that multiple job-holders are
low-skilled workers who moonlight primarily for financial reasons, or that
the practice increases during economic downturns. Recent literature
highlights the significant links between moonlighting and job mobility.
Multiple job-holding allows for the development of workers’ skills and spurs