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Who are the microenterprise owners ? Evidence from Sri Lanka on Tokman v. de Soto

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  • de Mel, Suresh
  • McKenzie, David
  • Woodruff, Christopher

Abstract

Is the vast army of the self-employed in low income countries a source of employment generation? This paper uses data from surveys in Sri Lanka to compare the characteristics of own account workers (non-employers) with wage workers and with owners of larger firms. The authors use a rich set of measures of background, ability, and attitudes, including lottery experiments measuring risk attitudes. Consistent with the International Labor Organization's views of the self employed (represented by Tokman), the analysis finds that two-thirds to three-quarters of the own account workers have characteristics which are more like wage workers than larger firm owners. This suggests the majority of the own account workers are unlikely to become employers. Using a two and a half year panel of enterprises, the authors show that the minority of own account workers who are more like larger firm owners are more likely to expand by adding paid employees. The results suggest that finance is not the sole constraint to growth of microenterprises, and provides an explanation for the low rates of growth of enterprises supported by microlending.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4635.

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Date of creation: 01 May 2008
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Handle: RePEc:wbk:wbrwps:4635

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Keywords: Labor Markets; Tertiary Education; Work&Working Conditions; Microfinance;

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  11. Suresh de Mel & David McKenzie & Christopher Woodruff, 2008. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1329-1372, November.
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Cited by:
  1. Akay, Alpaslan & Khamis, Melanie, 2011. "The Persistence of Informality: Evidence from Panel Data," IZA Discussion Papers 6163, Institute for the Study of Labor (IZA).
  2. Dang, Hai-Anh & Lanjouw, Peter & Luoto, Jill & McKenzie, David, 2011. "Using repeated cross-sections to explore movements in and out of poverty," Policy Research Working Paper Series 5550, The World Bank.
  3. Lixin Colin Xu, 2011. "The Effects of Business Environments on Development: Surveying New Firm-level Evidence," World Bank Research Observer, World Bank Group, vol. 26(2), pages 310-340, August.
  4. Silvia Ardagna & Annamaria Lusardi, 2009. "Where does regulation hurt? Evidence from new businesses across countries," NBER Working Papers 14747, National Bureau of Economic Research, Inc.
  5. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2009. "Innovative firms or innovative owners ? determinants of innovation in micro, small, and medium enterprises," Policy Research Working Paper Series 4934, The World Bank.
  6. Annamaria Lusardi, 2008. "Financial Literacy: An Essential Tool for Informed Consumer Choice?," NBER Working Papers 14084, National Bureau of Economic Research, Inc.
  7. Bruhn, Miriam, 2012. "A tale of two species : revisiting the effect of registration reform on informal business owners in Mexico," Policy Research Working Paper Series 5971, The World Bank.
  8. David McKenzie, 2010. "Impact Assessments in Finance and Private Sector Development: What Have We Learned and What Should We Learn?," World Bank Research Observer, World Bank Group, vol. 25(2), pages 209-233, August.
  9. Silvia Ardagna & Annamaria Lusardi, 2010. "Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints," NBER Chapters, in: International Differences in Entrepreneurship, pages 17-62 National Bureau of Economic Research, Inc.
  10. Silvia Ardagna & Annamaria Lusardi, 2008. "Explaining International Differences in Entrepreneurship: The Role of Individual Characteristics and Regulatory Constraints," NBER Working Papers 14012, National Bureau of Economic Research, Inc.
  11. John Bennett & Matthew Rablen, 2012. "Self-Employment, Wage Employment and Informality in a Developing Economy," CEDI Discussion Paper Series 12-02, Centre for Economic Development and Institutions(CEDI), Brunel University.
  12. Hasan, Rana & Jandoc, Karl Robert L., 2009. "Quality of Jobs in the Philippines: Comparing Self-Employment with Wage Employment," ADB Economics Working Paper Series 148, Asian Development Bank.
  13. Drugov, Mikhail & Macchiavello, Rocco, 2008. "Learning and Microlending," CEPR Discussion Papers 7011, C.E.P.R. Discussion Papers.
  14. Antoinette Schoar, 2010. "The Divide between Subsistence and Transformational Entrepreneurship," NBER Chapters, in: Innovation Policy and the Economy, Volume 10, pages 57-81 National Bureau of Economic Research, Inc.
  15. Khamis, Melanie, 2009. "A Note on Informality in the Labor Market," IZA Discussion Papers 4676, Institute for the Study of Labor (IZA).
  16. Ximena Peña Parga & Camilo Mondragón-Vélez, 2008. "Business Ownership and Self-Employment in Developing Economies: The Colombian Case," DOCUMENTOS CEDE 004672, UNIVERSIDAD DE LOS ANDES-CEDE.

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