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Household enterprises in Sub-Saharan Africa : why they matter for growth, jobs, and livelihoods

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  • Fox, Louise
  • Sohnesen , Thomas Pave

Abstract

Despite 40 percent of households relying on household enterprises (non-farm enterprises operated by a single individual or with the help of family members) as an income source, household enterprises are usually ignored in low-income Sub-Saharan-African development strategies. Yet analysis of eight countries shows that although the fast growing economies generated new private non-farm wage jobs at high rates, household enterprises generated most new jobs outside agriculture. Owing to the small size of the non-farm wage job sector, this trend is expected to continue for the foreseeable future. This analysis of enterprises and their owners shows that although it is a heterogeneous sector within countries, there are many similarities across countries, indicating that cross-country learning is possible. For labor force participants who want to use their skills and energy to create a non-farm income source for themselves and their families, household enterprises offer a good opportunity even if they remain small. The paper finds that given household human capital and location, household enterprise earnings have the same marginal effect on consumption as private wage and salary employment. The authors argue that household enterprises should be seen as part of an integrated job and development strategy.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6184.

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Date of creation: 01 Aug 2012
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Handle: RePEc:wbk:wbrwps:6184

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Keywords: Labor Markets; Banks&Banking Reform; Population Policies; Labor Policies; Rural Poverty Reduction;

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References

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  1. Loening, Josef & Mikael Imru, Laketch, 2009. "Ethiopia: Diversifying the Rural Economy. An Assessment of the Investment Climate for Small and Informal Enterprises," MPRA Paper 23278, University Library of Munich, Germany.
  2. Michael Grimm & Jens Krüger & Jann Lay, 2011. "Barriers To Entry And Returns To Capital In Informal Activities: Evidence From Sub‐Saharan Africa," Review of Income and Wealth, International Association for Research in Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages S27-S53, 05.
  3. Grimm, Michael & Hoeven, Rolph van der & Lay, Jann, 2011. "Unlocking potential : tackling economic, institutional and social constraints of informal entrepreneurship in Sub-Saharan Africa : main findings and policy conclusions," Social Protection Discussion Papers 77925, The World Bank.
  4. Francis Teal & Simon Quinn, 2008. "Private sector development and income dynamics: A panel study of the Tanzanian labour market," Economics Series Working Papers WPS/2008-09, University of Oxford, Department of Economics.
  5. Günther, Isabel & Launov, Andrey, 2012. "Informal employment in developing countries," Journal of Development Economics, Elsevier, Elsevier, vol. 97(1), pages 88-98.
  6. Francis Teal & Justin Sandefur, 2010. "The Returns to Formality and Informality in Urban Africa," Economics Series Working Papers CSAE WPS/2010-03, University of Oxford, Department of Economics.
  7. Douglas Gollin, 2001. "Nobody's Business but My Own: Self Employment and Small Enterprise in Economic Development," Center for Development Economics, Department of Economics, Williams College 172, Department of Economics, Williams College.
  8. Louise Fox & Melissa Sekkel Gaal, 2008. "Working Out of Poverty : Job Creation and the Quality of Growth in Africa," World Bank Publications, The World Bank, number 6434, August.
  9. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2009. "Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises," IZA Discussion Papers 3962, Institute for the Study of Labor (IZA).
  10. Rafael La Porta & Andrei Shleifer, 2008. "The Unofficial Economy and Economic Development," NBER Working Papers 14520, National Bureau of Economic Research, Inc.
  11. Pablo Fajnzylber & William Maloney & Gabriel Montes Rojas, 2006. "Microenterprise Dynamics in Developing Countries: How Similar are They to Those in the Industrialized World? Evidence from Mexico," World Bank Economic Review, World Bank Group, World Bank Group, vol. 20(3), pages 389-419.
  12. Michael Grimm & Jann Lay & François Roubaud & Julia Vaillant, 2011. "Informal Sector Dynamics In Times Of Fragile Growth: The Case Of Madagascar," Working Papers, DIAL (Développement, Institutions et Mondialisation) DT/2011/10, DIAL (Développement, Institutions et Mondialisation).
  13. Fox, Louise & Pimhidzai, Obert, 2011. "Is informality welfare-enhancing structural transformation ? evidence from Uganda," Policy Research Working Paper Series 5866, The World Bank.
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Citations

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Cited by:
  1. Louise Fox & Cleary Haines & Jorge Huerta Munoz & Alun H. Thomas, 2013. "Africa's Got Work to Do," IMF Working Papers 13/201, International Monetary Fund.
  2. Jones, Sam & Tarp, Finn, 2013. "Jobs and welfare in Mozambique," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Nix, Emily & Gamberoni, Elisa & Heath, Rachel, 2014. "Bridging the gap : identifying what is holding self-employed women back in Ghana, Rwanda, Tanzania, the Republic of Congo, and Uganda," Policy Research Working Paper Series 6946, The World Bank.
  4. Monga, Celestin, 2013. "The mechanics of job creation : seizing the new dividends of globalization," Policy Research Working Paper Series 6661, The World Bank.
  5. Benjamin, Nancy & Beegle, Kathleen & Recanatini, Francesca & Santini, Massimiliano, 2014. "Informal economy and the World Bank," Policy Research Working Paper Series 6888, The World Bank.

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