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Caste discrimination and barriers to microenterprise growth in Nepal

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  • Espen Villanger
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    Abstract

    Studies of microbusiness in poor countries find high marginal returns to capital but also lack of investments. This paper analyzes how caste-based segmentation in the capital and labor markets can act as obstacles to investment in microbusiness in rural in Nepal and also explain high marginal returns to capital. Using a household survey purposively designed for assessing caste as a barrier to microbusiness growth, we find that segmentation leads to inefficient allocation of entrepreneurial talent, labor and capital. This, in turn, leads to lower wages and smaller and less profitable businesses for low castes (Dalits) and lower economic growth of the local economy. The study covers a range of barriers to doing business and finds that in addition to caste segmentation, access to capital and lack of skills and knowledge are the main constraints to doing microbusiness in the studied areas.

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    Bibliographic Info

    Paper provided by CMI (Chr. Michelsen Institute), Bergen, Norway in its series CMI Working Papers with number 9.

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    Length: 33 pages
    Date of creation: 2012
    Date of revision:
    Handle: RePEc:chm:wpaper:wp2012-9

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    1. Parente, Stephen L & Prescott, Edward C, 1994. "Barriers to Technology Adoption and Development," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 298-321, April.
    2. Douglas Gollin, 2001. "Nobody's Business but My Own: Self Employment and Small Enterprise in Economic Development," Center for Development Economics 172, Department of Economics, Williams College.
    3. Kjetil Bjorvatn & Bertil Tungodden, 2010. "Teaching Business in Tanzania: Evaluating Participation and Performance," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 561-570, 04-05.
    4. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2007. "Returns to capital in microenterprises : evidence from a field experiment," Policy Research Working Paper Series 4230, The World Bank.
    5. John McMillan & Christopher Woodruff, 1999. "Interfirm Relationships And Informal Credit In Vietnam," The Quarterly Journal of Economics, MIT Press, vol. 114(4), pages 1285-1320, November.
    6. Dean Karlan & Martin Valdivia, 2006. "Teaching entrepreneurship: Impact of business training on microfinance clients and institutions," Natural Field Experiments 00282, The Field Experiments Website.
    7. Klinger, Bailey & Sch√ľndeln, Matthias, 2011. "Can Entrepreneurial Activity be Taught? Quasi-Experimental Evidence from Central America," World Development, Elsevier, vol. 39(9), pages 1592-1610, September.
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