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Nobody's business but my own: Self-employment and small enterprise in economic development

  • Gollin, Douglas

In most poor countries, small firms and self-employment are the dominant forms of business enterprise--even in the manufacturing sector. For rich countries, in contrast, self-employed people account for very small shares of manufacturing employment and output. This paper builds on Lucas [1978. On the size distribution of business firms. Bell Journal of Economics 9(2), 508-523] to ask whether structural changes of this kind are driven by productivity differences. A model, calibrated to Japanese time-series data, is shown to mimic key features of cross-country and time-series data. The results support the idea that changes in aggregate productivity account for much of the cross-country variation in establishment size and self-employment rates.

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Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): 2 (March)
Pages: 219-233

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Handle: RePEc:eee:moneco:v:55:y:2008:i:2:p:219-233
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505566

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  1. Lawrence J. Christiano, 1989. "Understanding Japan's saving rate: the reconstruction hypothesis," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 10-25.
  2. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
  3. Tybout, James, 1998. "Manufacuring firms in developing countries - how well do they do, and why?," Policy Research Working Paper Series 1965, The World Bank.
  4. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  5. Steven Tadelis & Oliver E.Williamson, 2012. "Transaction Cost Economics," Introductory Chapters, in: Robert Gibbons & John Roberts (ed.), : The Handbook of Organizational Economics Princeton University Press.
  6. Simon Gilchrist & John C. Williams, 2001. "Transition dynamics in vintage capital models: explaining the postwar catch-up of Germany and Japan," Finance and Economics Discussion Series 2001-07, Board of Governors of the Federal Reserve System (U.S.).
  7. Fumio Hayashi, 1989. "Is Japan's saving rate high?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 3-9.
  8. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-795, December.
  9. Francis Teal, 1995. "Real wages and the demand for labour in Ghana's manufacturing sector," CSAE Working Paper Series 1995-07, Centre for the Study of African Economies, University of Oxford.
  10. Dan Bernhardt & Huw Lloyd-Ellis, 1993. "Enterprise, Inequality and Economic Development," Working Papers 893, Queen's University, Department of Economics.
  11. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
  12. King, Robert G & Rebelo, Sergio T, 1993. "Transitional Dynamics and Economic Growth in the Neoclassical Model," American Economic Review, American Economic Association, vol. 83(4), pages 908-931, September.
  13. Holmstrom, Bengt R. & Tirole, Jean, 1989. "The theory of the firm," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 2, pages 61-133 Elsevier.
  14. Gollin, Douglas, 1995. "Do Taxes on Large Firms Impede Growth? Evidence from Ghana," Bulletins 7488, University of Minnesota, Economic Development Center.
  15. Hopenhayn, Hugo A, 1992. "Entry, Exit, and Firm Dynamics in Long Run Equilibrium," Econometrica, Econometric Society, vol. 60(5), pages 1127-1150, September.
  16. 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.
  17. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn.
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