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Do Entrepreneurship Policies Drive Job Creation?: A Look at the Evidence
In Latin America and the Caribbean (LAC), 51% of working-age adults live in working poverty and are affected by widespread informality and low productivity. Active labor market policies are essential to address these problems, but few countries in the region have taken advantage of the full range of such programs. Furthermore, there is disagreement on best practices and how effective they can be in different contexts. This paper sheds light on this issue by exploring the various ways that entrepreneurship policies have been implemented around the world. Entrepreneurship policies seek to reduce barriers for self-employed individuals and entrepreneurs and increase their productivity. In this paper, we analyze these policies by reviewing 38 research articles covering interventions with traditional and non-traditional training, financial support, technical assistance, and advisory services (also referred to as consulting in some cases). Key findings indicate that “hard” interventions such as financing can be effective as standalone initiatives in developed economies. However, it takes a combination of “soft” and “hard” interventions to significantly improve employment prospects in developing economies. We also found that well-designed programs can boost inclusion for disadvantaged groups, especially when properly targeted. Our analysis reveals the importance of promoting productive entrepreneurship, which hinges on identifying individuals highly likely to succeed if not for barriers standing in their way. Another takeaway was that entrepreneurship policies should be seen as a driver of inclusion and labor mobility, not just lower unemployment. Finally, policy designers must take into account the regional, national, or local context, steering clear of one-size-fits-all solutions. Ultimately, these interventions hold promise for generating employment opportunities and livelihoods, as well as for spurring economic growth. They can valuably complement other active labor market policies, especially in less dynamic labor markets (such as small cities) and for disadvantaged groups. When thoughtfully designed and targeted, such policies can help reshape the regions employment landscape through gains in inclusion, labor mobility, and regional development.
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