Do Entrepreneurial Activities Decrease Income Inequality and Boost Human Development? Evidence from BRICS Economies

Abstract

This article investigates the relationship between entrepreneurial activities, income inequality and human development in Brazil, Russia, India, China and South Africa (BRICS) nations. The study uses a 12-year time series data (2004–2015) for five BRICS countries: Brazil, Russia, India, China and South Africa. The secondary data are collected from Global Entrepreneurship and Development Institute (GEDI), Global Entrepreneurship Monitor (GEM), World Bank indicators and World Inequality Database. Fixed effect and random effect approach are used to develop a model for investigating the association among entrepreneurial activities, income inequality and human development. The study found that entrepreneurial activities will not only increase the share of the top 1% earners but also increase the share of bottom 50% earners in BRICS countries. Thus, the difference between richest and poorest will remain constant, and entrepreneurial activities have neutral impact on income inequality. The other important finding of the study is that entrepreneurial activities have a positive impact on human development in BRICS nations. Hence, personal gains linked with enhanced entrepreneurial activities accrue to both top 1% and bottom 50% earners. Thus, entrepreneurship will increase the share of the richest and poorest in national income and the poorest can also enjoy the benefits of economic growth, which results in more human development in the societies of BRICS nations. The study recommends to policymakers of BRICS nations that they should focus on creation of entrepreneurial ecosystem in BRICS countries, which further enhances the human development in these economies. In addition, the study more precisely recommends that welfare of the society could be improved with the help of entrepreneurial activities. The study analyses the characteristics, motivations and ambitions of individual starting businesses in BRICS countries.