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Self-Employment in the Developing World

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  • Gindling, T.H.
  • Newhouse, David

Abstract

This paper analyzes heterogeneity among the self-employed in 74 developing countries, representing two-thirds of the population of the developing world. After profiling how worker characteristics vary by employment status, it classifies self-employed workers outside agriculture as “successful” or “unsuccessful” entrepreneurs, based on two measures of success: whether the worker is an employer, and whether the worker resides in a non-poor household. Four main findings emerge. First, jobs exhibit a clear pecking order, with household income and worker education highest for employers, followed by wage and salaried employees, non-agricultural own-account workers, non-agricultural unpaid family workers, and finally agricultural workers. Second, a substantial minority of own-account workers reside in non-poor households, suggesting that their profits are often a secondary source of household income. Third, as per capita income increases across countries, the structure of employment shifts rapidly, first out of agriculture into unsuccessful non-agricultural self-employment, and then mainly into non-agricultural wage employment. Finally, roughly one-third of the unsuccessful entrepreneurs share similar characteristics with their successful counterparts, suggesting they have the potential to be successful but face constraints to growth. The authors conclude that although interventions such as access to credit can benefit a substantial portion of the self-employed, effectively targeting the minority of self-employed with higher growth potential is important, particularly in low-income contexts. The results also highlight the potential benefits of policies that facilitate shifts in the nature of work, first from agricultural labor into non-agricultural self-employment, and then into wage and salaried jobs.

Suggested Citation

  • Gindling, T.H. & Newhouse, David, 2014. "Self-Employment in the Developing World," World Development, Elsevier, vol. 56(C), pages 313-331.
  • Handle: RePEc:eee:wdevel:v:56:y:2014:i:c:p:313-331 DOI: 10.1016/j.worlddev.2013.03.003
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    References listed on IDEAS

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    1. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
    2. Gindling, T.H. & Newhouse, David, 2014. "Self-Employment in the Developing World," World Development, Elsevier, vol. 56(C), pages 313-331.
    3. Cho, Yoonyoung & Honorati, Maddalena, 2014. "Entrepreneurship programs in developing countries: A meta regression analysis," Labour Economics, Elsevier, vol. 28(C), pages 110-130.
    4. Bosch, Mariano & Maloney, William F., 2010. "Comparative analysis of labor market dynamics using Markov processes: An application to informality," Labour Economics, Elsevier, vol. 17(4), pages 621-631, August.
    5. Simeon Djankov & Yingyi Qian & Gérard Roland & Ekaterina Zhuravskaya, 2006. "Who Are China's Entrepreneurs?," American Economic Review, American Economic Association, pages 348-352.
    6. Simeon Djankov & Edward Miguel & Yingyi Qian & Gérard Roland & Ekaterina Zhuravskaya, 2005. "Who are Russia's Entrepreneurs?," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 587-597, 04/05.
    7. Carlo Pietrobelli & Roberta Rabellotti & Matteo Aquilina, 2004. "An empirical study of the determinants of self-employment in developing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(6), pages 803-820.
    8. Victor E. Tokman, 2007. "Modernizing the informal sector," Working Papers 42, United Nations, Department of Economics and Social Affairs.
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    1. repec:eee:wdevel:v:98:y:2017:i:c:p:430-446 is not listed on IDEAS
    2. Gindling, T.H. & Newhouse, David, 2014. "Self-Employment in the Developing World," World Development, Elsevier, vol. 56(C), pages 313-331.
    3. Brixiová, Zuzana & Ncube, Mthuli & Bicaba, Zorobabel, 2015. "Skills and Youth Entrepreneurship in Africa: Analysis with Evidence from Swaziland," World Development, Elsevier, vol. 67(C), pages 11-26.
    4. Ciarli, Tommaso & Kofol, Chiara & Menon, Carlo, 2015. "Business as unusual. An explanation of the increase of private economic activity in high-conflict areas in Afghanistan," LSE Research Online Documents on Economics 65015, London School of Economics and Political Science, LSE Library.
    5. Gine, Xavier & Mansuri, Ghazala, 2014. "Money or ideas ? a field experiment on constraints to entrepreneurship in rural Pakistan," Policy Research Working Paper Series 6959, The World Bank.
    6. Marcus H. Böhme & Sarah Kups, 2017. "The economic effects of labour immigration in developing countries: A literature review," OECD Development Centre Working Papers 335, OECD Publishing.
    7. Cho, Yoonyoung & Honorati, Maddalena, 2014. "Entrepreneurship programs in developing countries: A meta regression analysis," Labour Economics, Elsevier, vol. 28(C), pages 110-130.
    8. Luis Medrano-Adán & Vicente Salas-Fumás & J. Sanchez-Asin, 2015. "Heterogeneous entrepreneurs from occupational choices in economies with minimum wages," Small Business Economics, Springer, vol. 44(3), pages 597-619, March.
    9. Nadia Simoes & Nuno Crespo & Sandrina B. Moreira, 2016. "Individual Determinants Of Self-Employment Entry: What Do We Really Know?," Journal of Economic Surveys, Wiley Blackwell, vol. 30(4), pages 783-806, September.
    10. World Bank, 2016. "Bangladesh Social Protection and Labor Review," World Bank Other Operational Studies 25265, The World Bank.
    11. Cho, Yoonyoung. & Kalomba, Davie. & Mobarak, Ahmed Mushfiq. & Orozco, Victor., 2015. "Differences in the effects of vocational training on men and women : constraints on women and drop-out behaviour," ILO Working Papers 994874103402676, International Labour Organization.
    12. Sudarshan, Ratna M., 2014. "Enabling women's work," ILO Working Papers 994860303402676, International Labour Organization.
    13. Falco, Paolo & Maloney, William F. & Rijkers, Bob & Sarrias, Mauricio, 2015. "Heterogeneity in subjective wellbeing: An application to occupational allocation in Africa," Journal of Economic Behavior & Organization, Elsevier, vol. 111(C), pages 137-153.
    14. Premand, Patrick & Brodmann, Stefanie & Almeida, Rita & Grun, Rebekka & Barouni, Mahdi, 2016. "Entrepreneurship Education and Entry into Self-Employment Among University Graduates," World Development, Elsevier, vol. 77(C), pages 311-327.
    15. repec:ilo:ilowps:486030 is not listed on IDEAS
    16. Hazarika, Bhabesh & Goswami, Kishor, 2014. "Rural Non-Farm Micro-Entrepreneurship or Not: Gender Issue in Decision Making," EconStor Conference Papers 125611, ZBW - German National Library of Economics.
    17. Prieger, James E. & Bampoky, Catherine & Blanco, Luisa R. & Liu, Aolong, 2016. "Economic Growth and the Optimal Level of Entrepreneurship," World Development, Elsevier, vol. 82(C), pages 95-109.
    18. David Canning & Sangeeta Raja & Abdo S. Yazbeck, 2015. "Africa's Demographic Transition," World Bank Publications, The World Bank, number 22036.
    19. repec:kap:sbusec:v:49:y:2017:i:1:d:10.1007_s11187-016-9820-z is not listed on IDEAS
    20. Hu, Feng, 2015. "Return to Education for China’s Return Migrant Entrepreneurs," World Development, Elsevier, vol. 72(C), pages 296-307.
    21. Vial, Virginie & Hanoteau, Julien, 2015. "Returns to Micro-Entrepreneurship in an Emerging Economy: A Quantile Study of Entrepreneurial Indonesian Households’ Welfare," World Development, Elsevier, vol. 74(C), pages 142-157.
    22. Zuzana Brixiova & Mthuli Ncube, 2014. "Working Paper 204 - Skills and Youth Entrepreneurship in Africa: Analysis with Evidence from Swaziland," Working Paper Series 2136, African Development Bank.

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