Building on a Lewis-type model of structural change and entrepreneurship we show how a global economic crisis consisting of a financial and a trade shock can undermine structural change in developing countries via the start-up and innovation activities of entrepreneurs. The model analytics identifies a number of challenges for structural change in a post-crisis world, including dealing with greater bank concentration, higher costs of bank monitoring and stricter regulations and collateral requirements, flights-to-safety in global finance and reduced incentives for innovation and job-creating start-up activities.
Gries, T.; Naude, W. Entrepreneurship, Structural Change and a Global Economic Crisis. UNU-WIDER, Helsinki, Finland (2010) 34 pp. ISBN 978-92-9230-294-8 [WIDER Working Paper No. 2010/57]