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Household enterprises in Sub-Saharan Africa : why they matter for growth, jobs, and livelihoods

  • Fox, Louise
  • Sohnesen , Thomas Pave

Despite 40 percent of households relying on household enterprises (non-farm enterprises operated by a single individual or with the help of family members) as an income source, household enterprises are usually ignored in low-income Sub-Saharan-African development strategies. Yet analysis of eight countries shows that although the fast growing economies generated new private non-farm wage jobs at high rates, household enterprises generated most new jobs outside agriculture. Owing to the small size of the non-farm wage job sector, this trend is expected to continue for the foreseeable future. This analysis of enterprises and their owners shows that although it is a heterogeneous sector within countries, there are many similarities across countries, indicating that cross-country learning is possible. For labor force participants who want to use their skills and energy to create a non-farm income source for themselves and their families, household enterprises offer a good opportunity even if they remain small. The paper finds that given household human capital and location, household enterprise earnings have the same marginal effect on consumption as private wage and salary employment. The authors argue that household enterprises should be seen as part of an integrated job and development strategy.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6184.

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Date of creation: 01 Aug 2012
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Handle: RePEc:wbk:wbrwps:6184
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  1. Fox, Louise & Pimhidzai, Obert, 2011. "Is informality welfare-enhancing structural transformation ? evidence from Uganda," Policy Research Working Paper Series 5866, The World Bank.
  2. de Mel, Suresh & McKenzie, David & Woodruff, Christopher, 2009. "Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises," IZA Discussion Papers 3962, Institute for the Study of Labor (IZA).
  3. Loening, Josef & Mikael Imru, Laketch, 2009. "Ethiopia: Diversifying the Rural Economy. An Assessment of the Investment Climate for Small and Informal Enterprises," MPRA Paper 23278, University Library of Munich, Germany.
  4. Douglas Gollin, 2001. "Nobody's Business but My Own: Self Employment and Small Enterprise in Economic Development," Center for Development Economics 172, Department of Economics, Williams College.
  5. Michael Grimm & Jens Krüger & Jann Lay, 2011. "Barriers To Entry And Returns To Capital In Informal Activities: Evidence From Sub‐Saharan Africa," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57, pages S27-S53, 05.
  6. Rafael La Porta & Andrei Shleifer, 2008. "The Unofficial Economy and Economic Development," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 275-363.
  7. Julia Vaillant & Michael Grimm & Jann Lay & François Roubaud, 2014. "Informal sector dynamics in times of fragile growth: The case of Madagascar," The European Journal of Development Research, Palgrave Macmillan, vol. 26(4), pages 437-455, September.
  8. Francis Teal & Simon Quinn, 2008. "Private sector development and income dynamics: A panel study of the Tanzanian labour market," Economics Series Working Papers WPS/2008-09, University of Oxford, Department of Economics.
  9. Falco, Paolo & Kerr, Andrew & Rankin, Neil & Sandefur, Justin & Teal, Francis, 2011. "The returns to formality and informality in urban Africa," Labour Economics, Elsevier, vol. 18(S1), pages S23-S31.
  10. Günther, Isabel & Launov, Andrey, 2012. "Informal employment in developing countries," Journal of Development Economics, Elsevier, vol. 97(1), pages 88-98.
  11. Pablo Fajnzylber & William Maloney & Gabriel Montes Rojas, 2006. "Microenterprise Dynamics in Developing Countries: How Similar are They to Those in the Industrialized World? Evidence from Mexico," World Bank Economic Review, World Bank Group, vol. 20(3), pages 389-419.
  12. repec:dau:papers:123456789/7079 is not listed on IDEAS
  13. Louise Fox & Melissa Sekkel Gaal, 2008. "Working Out of Poverty : Job Creation and the Quality of Growth in Africa," World Bank Publications, The World Bank, number 6434, August.
  14. Grimm, Michael & Hoeven, Rolph van der & Lay, Jann, 2011. "Unlocking potential : tackling economic, institutional and social constraints of informal entrepreneurship in Sub-Saharan Africa : main findings and policy conclusions," Social Protection and Labor Policy and Technical Notes 77925, The World Bank.
  15. Chambers, R. & Conway, G. R., 1991. "Sustainable rural livelihoods: Practical concepts for the 21st century," IWMI Books, Reports H032821, International Water Management Institute.
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