| Abstract: |
In Africa’s least developed countries (LDCs), escape from poverty and
convergence to living standards of more advanced economies depends critically
on structural transformation and the emergence of productive entrepreneurship
that would accelerate growth and job creation. So far, however, subsistence
agriculture has been the main source of employment in these countries, while a
dynamic private sector in industry or high value-added services has remained
elusive. Utilizing the flow approach to labor markets, this paper complements
the empirical literature and numerous surveys on small and medium enterprise
(SME) constraints and develops a theoretical framework that examines the main
obstacles to entrepreneurship in Africa’s LDCs. The paper posits that given
the persistent frictions in product and labor markets as well as skill
shortages that characterize these economies, development of productive
entrepreneurship cannot be left to markets alone. The policy analysis suggests
that the state has an important role to play. Well-targeted government
interventions including training of potential entrepreneurs and workers can
help establish more modern and highly productive SME clusters that Africa’s
LDCs need. |