IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Nobody's Business but My Own: Self Employment and Small Enterprise in Economic Development

In most poor countries, small firms and self employment are the dominant forms of business enterprise. This phenomenon is true not only in agriculture and the service sector: even in manufacturing, large fractions of the workforce are self-employed. In Ghana, as an illustration, more than 75 percent of the manufacturing workforce were self-employed in 1984. For rich countries, in contrast, self-employed people account for very small shares of manufacturing employment and almost negligible fractions of output. Some observers explain the prevalence of self-employment in poor countries as a phenomenon of distorted policies or credit market imperfections. This paper, in contrast, uses a variant of the Lucas (1978) span-of-control model to ask whether changes in establishment size and employment structure can be explained as a consequence of growing productivity. A model, calibrated to Japanese time series data, is shown to mimic key features of cross-country and time series data. An implication is that changes in relative factor prices, driven by changing productivity, account for a large portion of the cross-country differences in establishment size and self-employment rates. Although policy distortions and market imperfections may also be important in explaining the prevalence of self employment in developing countries, productivity changes alone could account for as much as two-thirds of the variation observed in the cross-section data.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Department of Economics, Williams College in its series Center for Development Economics with number 172.

in new window

Date of creation: May 2001
Date of revision:
Handle: RePEc:wil:wilcde:172
Contact details of provider: Postal: Williamstown, MA 01267
Phone: 413 597 2476
Fax: 413 597 4045
Web page:

More information through EDIRC

Order Information: Email:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Francis Teal, 1995. "Real wages and the demand for labour in Ghana's manufacturing sector," CSAE Working Paper Series 1995-07, Centre for the Study of African Economies, University of Oxford.
  2. Gollin, Douglas, 1995. "Do Taxes on Large Firms Impede Growth? Evidence from Ghana," Bulletins 7488, University of Minnesota, Economic Development Center.
  3. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wil:wilcde:172. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stephen Sheppard)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.