A Review of the Role of Entrepreneurship in Stimulating Economic Growth, Reducing Unemployment and Increasing Level of Income in Low to Middle Income Countries.

Topics: Economic growth, Economics, Unemployment Pages: 12 (3888 words) Published: April 28, 2012

This paper sets out to review the role of entrepreneurship in stimulating economic growth, reducing unemployment and increasing levels of income in low to middle income countries. Nieman and Nieuwenhuizen (2009) states that the contribution of entrepreneurs to the economy can be attributed to their special qualities. They also further states that entrepreneurs have been responsible for growth and development over the centuries and are identified as the key role players in the economy of every country. The paper identifies the different definitions of an entrepreneur which are identified as the different channels in which entrepreneurship lead to economic growth, reduced unemployment and increased levels of income among countries. As a result of the role of entrepreneurship in any country, most countries emphasises on integrating entrepreneurial activity in its economic policy. A discussion is made on developing economies mainly South Africa, China, Brazil and Russia comparing the entrepreneurial activity within the economies.

Economic growth is best defined as a long-term expansion of the productive potential of the economy. It is measured by the comparing the difference between the Gross National Product (GNP) in a year with the GNP of the previous year. A growing economy is when the difference is positive. The term simply refers to an increase in the ability to produce goods and services. It is easier to define unemployment when there is an understanding of the term economic growth. Unemployment refers to when a person who is actively searching for employment cannot find work to do. This is an instrument used to determine the healthiness of an economy. After knowing the levels of unemployment in an economy, determining the level of income distribution becomes a bit projected. The level of income in an economy refers to the way in which in money is distributed among the population in an economy. The above three defined terms has a link to each other.

The level of economic growth have a direct proportional influence on the possible jobs available in the economy while a reciprocal relationship exist between the level of income in the particular economy and levels of unemployment. The level of income is directly proportional to economic growth. Also, the level of unemployment is directly proportional to the level of income in an economy. However, all the above aspects are influenced by the level of entrepreneurship in the particular economy. An economy with high activity of entrepreneurship is more likely to be characterized by high economic growth, reducing levels of unemployment and increasing levels of income while an economy with low entrepreneurial activity on the other hand can be characterized by low economic growth, high levels of unemployment and low levels of income.

Entrepreneurship cannot be separated from the following terms “economic growth”, “employment” and “country income level distribution” as all the entrepreneurial activities contribute largely to economic growth, levels of employment and income distribution. Different nature of entrepreneurs stimulates the growth of an economy in different ways. In any country with high levels of entrepreneurial activities or which experienced high entrepreneurial activity, the economy tends to be of middle to high income and the unemployment levels tend to be decreasing if not low. However, economies with low income distribution are characterised by low entrepreneurial activities and mostly, there are significant levels of unemployment. Such low income economies have high records of poverty which leads them to seek donors. Different authors made contributions on this topic and this paper compares and links the information obtained into a comprehensive review.

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