Poverty, entrepreneurship, and economic growth in Africa

Abstract

AbstractLiterature abounds on the impact of entrepreneurship on economic growth, but with little attention to the role of entrepreneurship in poverty reduction. Furthermore, little attention has been paid to the triangular relationship among poverty reduction, entrepreneurship, and growth in Africa. In this study, we examine the dynamic relationship among these three variables using data collected from 18 African countries. Data are sourced from World Bank development indicators and the World Bank's entrepreneurship database. The study uses batteries of panel data estimation techniques to analyze the data. The following findings emerged: (1) there is bidirectional causality between poverty reduction and growth. (2) There is bidirectional causality between growth and entrepreneurship in Africa. (3) There is unidirectional causality moving from entrepreneurship to poverty reduction. (4) Entrepreneurship significantly reduces poverty in Africa. (5) Impulse response shows that all the variables positively respond to shocks in each other. The study concludes that entrepreneurship enhances poverty reduction in Africa and has a significant impact on economic growth.