Entrepreneurs hold the key to income growth in developing economies

Occupation shifts, education and enhanced intermediation account for 39% of income and inequality change.

Approximately 80% of the growth in productivity at the national level is due to entrepreneurial activity, along with an expanding formal financial sector.

After Thailand faced an economic crisis in 1997 and wages dropped, the share of households in business for themselves nearly doubled to 40%, though these businesses were not as profitable as those established before the crisis.

The availability of credit from government loan programs and community-based cooperative loan arrangements has had a notable impact on consumption, profits and wages.

Building from Townsend’s research, The Enterprise Initiative will use the precise data from Thailand to construct the monthly income, balance sheets and cash-flow statements of scientifically sampled households, to evaluate the effects of entrepreneurship on macro-economic growth.

Additionally, the Initiative will seek to collect new data from other emerging economies, such as Ghana, Mexico and India, to test economic theories and evaluate enterprise on a wider scale.

Housed at the University’s distinguished Economics Department, the Enterprise Initiative will tackle questions developed by economists as they incorporate their expertise to evaluate the range of choices and consequences that arise as an economy grows, or fails to grow.

The researchers’ high-quality data will assist policy-makers in modeling different policy options. Researchers will be able to suggest, for instance, how constructing a road in a particular area could boost business and what financial products and services could be most effective in encouraging development.

The project will also shed new light on the circumstances that lead to the growth of entrepreneurialism, a critical asset in emerging economies.

The project intends to examine how people in ordinary circumstances become involved in the creation of wealth for their own benefit, and ultimately the benefit of many others. It will examine factors, such as mindsets, aspirations and talent, which enable people to overcome obstacles and become accomplished entrepreneurs.

By gathering data, sharing the stories of successful individuals who have made transformations from poverty to relative abundance, modeling choices and modeling their impact on the larger economy, the project hopes to provide guidance to policy-makers and others who are looking to alleviate world poverty.