DEPP working paper

This Working Paper is part of the Development Economics and Public Policy series

Does Local Financial Development Matter for Entrepreneurship in the Informal
Sector? Evidence from India

Vinish Kathuria, Rajesh Raj S N and Kunal Sen.

Abstract

The regional dimension of entrepreneurship has been a subject of great importance to scholars of regional development (Acs and Storey 2004, Acs and Armington 2006). Small firms are an important source of economic dynamism and particularly job creation, and the formation of such firms can be a crucial determinant of economic growth and employment generation, especially in lagging regions (Fritsch 1997, Audretsch and Thurik 2004, Parker 2004, Audretsch and Keilbach 2004, Fritsch et al. 2005). Historically, in most countries, whether in the developed or developing world, rates of new firm formation differ significantly across regions within the same country (Keeble and Walker 1994, Braunerhjelm and Borgman 2004). Such variation in the rate of new firm formation is often seen as a cause of wide divergence across regions in the same country in economic growth and employment opportunities, and can become a matter of significant policy concern for policy-makers.

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