Arbeitspapier

Self-employment and development

Selection into self-employment among the poor is dominated by subsistence concerns, which leads to high levels of unproductive self-employment in developing countries. We incorporate this view into an otherwise benchmark macro-development model by allowing for labor frictions. Standard models that rely only on financial frictions are at odds with crucial features of the data, including large self-employment rates among the poor and the response of labor markets after well-identified labor demand shocks. We study the efficacy of a wide range of development policies on occupational choices, prices, and productivity. We find that providing unemployment benefits improves selection into self-employment, increasing total-factor productivity (TFP). Self-employment grants and unconditional transfers lower TFP by making self-employment more attractive to low-productivity individuals. Finally, financial reforms that improve access to credit succeed in raising productivity, but they do not address the subsistence concerns of poor individuals. Self-employment is still concentrated among the poor after the reforms take place.

Sprache
Englisch

Erschienen in
Series: CHCP Working Paper ; No. 2020-9

Klassifikation
Wirtschaft
Financial Markets and the Macroeconomy
Macroeconomic Analyses of Economic Development
Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
Thema
Self-Employment
Unemployment
Development
Micro-Finance

Ereignis
Geistige Schöpfung
(wer)
Herreño, Juan
Ocampo Díaz, Sergio
Ereignis
Veröffentlichung
(wer)
The University of Western Ontario, Centre for Human Capital and Productivity (CHCP)
(wo)
London (Ontario)
(wann)
2020

Handle
Letzte Aktualisierung
10.03.2025, 11:46 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Herreño, Juan
  • Ocampo Díaz, Sergio
  • The University of Western Ontario, Centre for Human Capital and Productivity (CHCP)

Entstanden

  • 2020

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