| By: |
de Mel, Suresh (University of Peradeniya);
McKenzie, David (World Bank);
Woodruff, Christopher (University of California, San Diego) |
| Abstract: |
Is the vast army of the self-employed in low income countries a source of
employment generation? We use data from surveys in Sri Lanka to compare the
characteristics of own account workers (non-employers) with wage workers and
with owners of larger firms. We use a rich set of measures of background,
ability, and attitudes, including lottery experiments measuring risk
attitudes. Consistent with the ILO’s views of the self employed (represented
by Tokman), we find that 2/3rds to 3/4ths of the own account workers have
characteristics which are more like wage workers than larger firm owners. This
suggests the majority of the own account workers are unlikely to become
employers. Using a two and a half year panel of enterprises, we show that the
minority of own account workers who are more like larger firm owners are more
likely to expand by adding paid employees. The analysis suggests that finance
is not the sole constraint to growth of microenterprises, and provides an
explanation for the low rates of growth of enterprises supported by
microlending. |
| Keywords: |
entrepreneurship, self-employment, De Soto |
| JEL: |
O17 L26 |
| Date: |
2008–05 |
| URL: |
http://d.repec.org/n?u=RePEc:iza:izadps:dp3511&r=mfd |