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Caste discrimination and barriers to microenterprise growth in Nepal

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  • Espen Villanger

Abstract

Studies of microbusiness in poor countries find high marginal returns to capital but also lack of investments. This paper analyzes how caste-based segmentation in the capital and labor markets can act as obstacles to investment in microbusiness in rural in Nepal and also explain high marginal returns to capital. Using a household survey purposively designed for assessing caste as a barrier to microbusiness growth, we find that segmentation leads to inefficient allocation of entrepreneurial talent, labor and capital. This, in turn, leads to lower wages and smaller and less profitable businesses for low castes (Dalits) and lower economic growth of the local economy. The study covers a range of barriers to doing business and finds that in addition to caste segmentation, access to capital and lack of skills and knowledge are the main constraints to doing microbusiness in the studied areas.

Suggested Citation

  • Espen Villanger, 2012. "Caste discrimination and barriers to microenterprise growth in Nepal," CMI Working Papers 9, CMI (Chr. Michelsen Institute), Bergen, Norway.
  • Handle: RePEc:chm:wpaper:wp2012-9
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    References listed on IDEAS

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    2. Kjetil Bjorvatn & Bertil Tungodden, 2009. "Teaching business in Tanzania: Evaluating participation and performance," CMI Working Papers 9, CMI (Chr. Michelsen Institute), Bergen, Norway.
    3. Dean Karlan & Martin Valdivia, 2011. "Teaching Entrepreneurship: Impact of Business Training on Microfinance Clients and Institutions," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 510-527, May.
    4. Gollin, Douglas, 2008. "Nobody's business but my own: Self-employment and small enterprise in economic development," Journal of Monetary Economics, Elsevier, vol. 55(2), pages 219-233, March.
    5. Klinger, Bailey & Schündeln, Matthias, 2011. "Can Entrepreneurial Activity be Taught? Quasi-Experimental Evidence from Central America," World Development, Elsevier, vol. 39(9), pages 1592-1610, September.
    6. 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.
    7. Suresh de Mel & David McKenzie & Christopher Woodruff, 2009. "Returns to Capital in Microenterprises: Evidence from a Field Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 124(1), pages 423-423.
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