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Is Small Beautiful? Small Enterprise, Aid and Employment in Africa

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  • Page, John
  • Soderbom, Måns

Abstract

Aid providers frequently link supporting small firms to job creation. Small firms create about half of new jobs in Africa, but they also have higher failure rates. Ignoring firm exit exaggerates net employment growth. Using panel data for Ethiopia, we find that small and large enterprises create similar numbers of net jobs. Moreover, wages in small firms are persistently lower. To create more `good´ jobs aid should target the constraints to the growth of firms of all sizes. Improving the `investment climate´ and new programmes to increase firms´ capabilities–through for example management training–offer better prospects for employment creation.

Suggested Citation

  • Page, John & Soderbom, Måns, 2012. "Is Small Beautiful? Small Enterprise, Aid and Employment in Africa," WIDER Working Paper Series 094, World Institute for Development Economic Research (UNU-WIDER).
  • Handle: RePEc:unu:wpaper:wp2012-094
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    References listed on IDEAS

    as
    1. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010. "Who Creates Jobs? Small vs. Large vs. Young," Working Papers 10-17, Center for Economic Studies, U.S. Census Bureau.
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    5. Chad Syverson, 2011. "What Determines Productivity?," Journal of Economic Literature, American Economic Association, vol. 49(2), pages 326-365, June.
    6. Nicholas Bloom & John Van Reenen, 2010. "Why Do Management Practices Differ across Firms and Countries?," Journal of Economic Perspectives, American Economic Association, vol. 24(1), pages 203-224, Winter.
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    8. Soderbom, Mans & Teal, Francis & Wambugu, Anthony, 2005. "Unobserved heterogeneity and the relation between earnings and firm size: evidence from two developing countries," Economics Letters, Elsevier, vol. 87(2), pages 153-159, May.
    9. Otsuka, Keijiro & Sonobe, Tetsushi, 2011. "A cluster-based industrial development policy for low-income countries," Policy Research Working Paper Series 5703, The World Bank.
    10. Yoshino, Yutaka, 2008. "Domestic constraints, firm characteristics, and geographical diversification of firm-level manufacturing exports in Africa," Policy Research Working Paper Series 4575, The World Bank.
    11. Thomas Farole, 2011. "Special Economic Zones in Africa : Comparing Performance and Learning from Global Experience," World Bank Publications, The World Bank, number 2268, June.
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    Citations

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    Cited by:

    1. John Ssozi & Simplice A. Asongu, Phd & Voxi Amavilah, 2018. "The Effectiveness Of Development Aid For Agriculture In Sub-Saharan Africa," Working Papers 1 3005, Office Of The Chief Economist, Development Bank of Nigeria.
    2. Admasu Shiferaw & Måns Söderbom & Eyerusalem Siba & Getnet Alemu, 2015. "Road Infrastructure and Enterprise Dynamics in Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 51(11), pages 1541-1558, November.
    3. John Page, 2016. "Industry in Tanzania Performance, prospects, and public policy," WIDER Working Paper Series 005, World Institute for Development Economic Research (UNU-WIDER).
    4. Shimeles Abebe & Adeleke Oluwole Salami & Anthony M. Simpasa, 2015. "Working Paper 221 - Employment Effects of Multilateral Development Bank Projects The Case of the African Development Bank," Working Paper Series 2160, African Development Bank.
    5. repec:eee:jbrese:v:98:y:2019:i:c:p:370-379 is not listed on IDEAS
    6. Tony Addison, 2015. "Thirty years in Africa.s development: From structural adjustment to structural transformation?," WIDER Working Paper Series 119, World Institute for Development Economic Research (UNU-WIDER).
    7. Simplice A. Asongu & Vanessa S. Tchamyou, 2019. "Foreign Aid, Education and Lifelong Learning in Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 10(1), pages 126-146, March.
    8. Tony Addison & Ville Pikkarainen & Risto Rönkkö & Finn Tarp, 2017. "Development and poverty in sub-Saharan Africa," WIDER Working Paper Series 169, World Institute for Development Economic Research (UNU-WIDER).
    9. repec:eee:wdevel:v:108:y:2018:i:c:p:157-168 is not listed on IDEAS
    10. repec:eee:techno:v:79:y:2019:i:c:p:56-70 is not listed on IDEAS
    11. Florence Crick & Mamadou Diop & Momadou Sow & Birame Diouf & Babacar Diouf & Joseph Muhwanga & Muna Dajani, 2016. "Enabling private sector adaptation in developing countries and their semi-arid regions – case studies of Senegal and Kenya," GRI Working Papers 258, Grantham Research Institute on Climate Change and the Environment.
    12. repec:liu:liucej:v:13:y:2016:i:2:p:221-246 is not listed on IDEAS
    13. Janvier Nkurunziza, 2016. "MSMEs Financing in Burundi and its Welfare Effect," BeFinD Working Papers 0111, University of Namur, Department of Economics.
    14. repec:bla:afrdev:v:30:y:2018:i:4:p:449-461 is not listed on IDEAS
    15. repec:bla:afrdev:v:29:y:2017:i:3:p:376-388 is not listed on IDEAS
    16. Crick, Florence & Eskander, Shaikh M.S.U. & Fankhauser, Sam & Diop, Mamadou, 2018. "How do African SMEs respond to climate risks? Evidence from Kenya and Senegal," World Development, Elsevier, vol. 108(C), pages 157-168.
    17. Simplice A. Asongu & Jacinta C. Nwachukwu, 2016. "Rational Asymmetric Development, Piketty and Poverty in Africa," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 13(2), pages 221-246, December.
    18. Addison, Tony & Singhal, Saurabh & Tarp, Finn, 2013. "Aid to Africa: The Changing Context," WIDER Working Paper Series 144, World Institute for Development Economic Research (UNU-WIDER).
    19. repec:gam:jsusta:v:11:y:2019:i:1:p:185-:d:194311 is not listed on IDEAS

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