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An empirical study of the determinants of self-employment in developing countries

  • Carlo Pietrobelli

    (University of Rome III, Rome, Italy)

  • Roberta Rabellotti

    (Dipartimento di Scienze Economiche e Metodi Quantitativi, Universit� del Piemonte Orientale, Italy)

  • Matteo Aquilina

    (University of Rome III, Rome, Italy)

Official statistics record a tremendous diversity in the level and dynamics of the self-employment rate across countries. Such diversity is even more pronounced for developing countries than for industrial countries. In these countries, self-employment figures may represent evidence of the spark of an emerging entrepreneurial class still in its infant stages, or conceal marginal urban manufacturing employment at the mere level of subsistence and disguising actual unemployment in years of economic depression. This paper documents this diversity for developing and developed countries with new empirical evidence, and tests the determinants of this diversity with econometric techniques. Estimates are presented on a sample of 64 developing countries and 19 developed countries in a period from the 1960s through the 1990s. The results generally confirm a negative association between the rate of self-employment and the stage of development: self-employment would tend to disappear with the development process. However, we present evidence suggesting that in some cases self-employment is also related to high value-added manufactured exports, representing a dynamic and emerging form of entrepreneurship. To this aim, self-employment would not be motivated by the desire to evade taxes, but rather an active role of the government may enhance it. The relationships with the development of the financial sector, educational levels, and other cultural factors tend to vary. Copyright © 2004 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 16 (2004)
Issue (Month): 6 ()
Pages: 803-820

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Handle: RePEc:wly:jintdv:v:16:y:2004:i:6:p:803-820
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  1. Blanchflower, David G & Meyer, Bruce D, 1994. " A Longitudinal Analysis of the Young Self-Employed in Australia and the United States," Small Business Economics, Springer, vol. 6(1), pages 1-19, February.
  2. Syrquin, Moshe, 1988. "Patterns of structural change," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 7, pages 203-273 Elsevier.
  3. Blau, David M, 1987. "A Time-Series Analysis of Self-employment in the United State," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 445-67, June.
  4. Taylor, Mark P, 1996. "Earnings, Independence or Unemployment: Why Become Self-Employed?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 253-66, May.
  5. House, William J. & Ikiara, Gerrishon K. & McCormick, Dorothy, 1993. "Urban self-employment in Kenya: Panacea or viable strategy?," World Development, Elsevier, vol. 21(7), pages 1205-1223, July.
  6. David Blanchflower & A Oswald, 1993. "Entrepreneurship," CEP Discussion Papers dp0134, Centre for Economic Performance, LSE.
  7. Evans, David S & Leighton, Linda S, 1989. "Some Empirical Aspects of Entrepreneurship," American Economic Review, American Economic Association, vol. 79(3), pages 519-35, June.
  8. Acs, Zoltán J & Audretsch, David B & Evans, David S, 1994. "Why Does the Self-Employment Rate Vary Across Countries and Over Time?," CEPR Discussion Papers 871, C.E.P.R. Discussion Papers.
  9. Blanchflower, David G. & Oswald, Andrew & Stutzer, Alois, 2001. "Latent entrepreneurship across nations," European Economic Review, Elsevier, vol. 45(4-6), pages 680-691, May.
  10. Yamada, Gustavo, 1996. "Urban Informal Employment and Self-Employment in Developing Countries: Theory and Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 44(2), pages 289-314, January.
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