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.
Some entrepreneurs and would-be entrepreneurs
face financial and bureaucratic barriers to starting a business
Because entrepreneurial activity can stimulate
job creation and long-term economic growth, promoting entrepreneurship is an
important goal. However, many financial, bureaucratic, and social barriers
can short-circuit the process of actually starting a business, especially in
transition economies that lack established institutional systems and
markets. The main obstacles are underdeveloped financial markets,
perceptions of administrative complexity, political and economic
instability, and lack of trust in institutions. Gender disparities in the
labor market are also reflected in less entrepreneurial activity among women
In the future, jobs will be created by those
bold enough to transform new ideas and knowledge into innovations
Globalization brings both good and bad job news.
The bad news is that jobs will be outsourced from high-cost developed
countries into lower-cost locations as soon as the associated economic
activity becomes mechanized and predictable. The good news is that
globalization creates opportunities that can be realized by people bold
enough to transform new ideas and knowledge into innovations. In that way,
entrepreneurs will play a vital role in creating the jobs of the future by
transforming ideas and knowledge into new products and services, which will
be the competitive advantage of the advanced economies.
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.
In transition economies, better property rights
protection and rule of law enforcement can boost job creation and growth
In the transition from central planning to a
market economy in the 1990s, governments focused on privatizing or closing
state enterprises, reforming labor markets, compensating laid-off workers,
and fostering job creation through new private firms. After privatization,
the focus shifted to creating a level playing field in the product market by
protecting property rights, enforcing the rule of law, and implementing
transparent start-up regulations. A fair, competitive environment with
transparent rules supports long-term economic growth and employment creation
through the reallocation of jobs in favor of new private firms.
Well-designed entrepreneurship programs show
promise for improving earnings and livelihoods of poor workers
Can entrepreneurship programs be successful
labor market policies for the poor? A large share of workers in developing
countries are self-employed in low-paying work or engage in low-return
entrepreneurial activities that keep these workers in poverty.
Entrepreneurship programs provide business training and access to finance,
advisory, and networking services with the aim of boosting workers’ earnings
and reducing poverty. Programs vary in design, which can affect their impact
on outcomes. Recent studies have identified some promising approaches that
are yielding positive results, such as combining training and financial
Poor paid employment prospects push minority
workers into working for themselves, often in low-reward work
In many countries, ethnic minority groups are
over-represented in self-employment compared with the majority community.
The kind of work done by minority entrepreneurs can therefore be an
important driver of the economic well-being of their ethnic group.
Furthermore, growing the self-employment sector is a policy objective for
many governments, which see it as a source of innovation, economic growth,
and employment. While self-employment might offer economic opportunities to
minority groups, it is important to understand the factors that underlie the
nature and extent of ethnic entrepreneurship to evaluate whether policy
measures should support it.
Effective measurement can help policymakers
harness a wide variety of gains from entrepreneurship
Policymakers rely on entrepreneurs to create
jobs, provide incomes, innovate, pay taxes to support public revenues,
create competition in industries, and much more. Due to its highly
heterogeneous nature, the choice of entrepreneurship measures is critically
important, impacting the diagnosis, analysis, projection, and understanding
of potential and existing policy. Some key aspects to measure include the
how (self-employment, new firm formation),
why (necessity, opportunity), and what (growth). As such, gaining better insight into
the challenges of measuring entrepreneurship is a necessary and productive
investment for policymakers.