UNLOCKING PRODUCTIVE ENTREPRENEURSHIP INAFRICA’S LEAST DEVELOPEDCOUNTRIES

In Africa’s least developed countries (LDCs), escape from poverty and convergence to livingstandards of more advanced economies depends critically on structural transformation and theemergence 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 andnumerous surveys on small and medium enterprise (SME) constraints and develops a theoreticalframework that examines the main obstacles to entrepreneurship in Africa’s LDCs. The paperposits that given the persistent frictions in product and labor markets as well as skill shortagesthat characterize these economies, development of productive entrepreneurship cannot be left tomarkets alone. The policy analysis suggests that the state has an important role to play. Welltargetedgovernment interventions including training of potential entrepreneurs and workers canhelp establish more modern and highly productive SME clusters that Africa’s LDCs need....