Does Forced Solidarity Hamper Investment in Small and Micro Enterprises?
AbstractSharing is a norm in many societies. We present a theoretical model on the trade-off between sharing and investment which we test on data from tailors in Burkina Faso. The empirical results support the idea that there are two behavioural patterns: entrepreneurs following an 'insurance regime' comply with sharing norms, are insured but reduce investment in their firm, whereas entrepreneurs in the 'growth regime' are not insured but take undistorted investment decisions. The choice of regime depends on the redistributive pressure, the willingness to take risk, and the return on investment.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7229.
Length: 44 pages
Date of creation: Feb 2013
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Find related papers by JEL classification:
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
- D92 - Microeconomics - - Intertemporal Choice - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-AFR-2013-03-16 (Africa)
- NEP-ALL-2013-03-16 (All new papers)
- NEP-ENT-2013-03-16 (Entrepreneurship)
- NEP-IAS-2013-03-16 (Insurance Economics)
- NEP-MFD-2013-03-16 (Microfinance)
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