Unstable policies lead to lower productivity and hinder entrepreneurial success.
Less developed countries with unstable policies can lead to lower productivity. Fluctuations in policies can impact the decision to become an entrepreneur or worker. Individuals with different skills may choose different occupations based on their abilities. In a simple model, productivity depends on managerial and financial skills. Entrepreneurs can borrow money to purchase goods at low prices and sell them later for profit. The study shows that policy changes can influence individuals' choices and affect productivity in the long run.