Entrepreneurship And Reforms In Developing Countries

The authors examine how institutional and policy reforms affect the relationship between entrepreneurship and growth. They perform Arellano-Bond GMM estimations on annual data (over the period 1990-2002) from a large group of developing countries and focus in particular on the interplay between policy and institutional reforms and entrepreneurship. They find that the joint effect of trade reform and entrepreneurship on growth is negative; suggesting that trade reform diminishes the positive effects of entrepreneurial ability on growth, while the joint effect of financial sector reform and entrepreneurship has a non-linear impact on growth. Financial sector reforms enhance the growth effects of entrepreneurship at initial levels and diminish it at high levels of reform.