Self-Employment in the Developing World

By T. Gindling, David Newhouse. 2012

395 citations recorded by the source corpus.

This paper analyzes heterogeneity among the self-employed in 74 developing countries, representing two-thirds of the population of the developing world. After profiling how worker characteristics vary by employment status, it classifies self-employed workers outside agriculture as “successful” or “unsuccessful” entrepreneurs, based on two measures of success: whether the worker is an employer, and whether the worker resides in a non-poor household. Four main findings emerge. First, jobs exhibit a clear pecking order, with household income and worker education highest for employers, followed by wage and salaried employees, non-agricultural own-account workers, non-agricultural unpaid family workers, and finally agricultural workers. Second, a substantial minority of own-account workers reside in non-poor households, suggesting that their profits are often a secondary source of household income. Third, as per capita income increases across countries, the structure of employment shifts rapidly, first out of agriculture into unsuccessful non-agricultural self-employment, and then mainly into non-agricultural wage employment. Finally, roughly one-third of the unsuccessful entrepreneurs share similar characteristics with their successful counterparts, suggesting they have the potential to be successful but face constraints to growth. The authors conclude that although interventions such as access to credit can benefit a substantial portion of the self-employed, effectively targeting the minority of self-employed with higher growth potential is important, particularly in low-income contexts. The results also highlight the potential benefits of policies that facilitate shifts in the nature of work, first from agricultural labor into non-agricultural self-employment, and then into wage and salaried jobs.

Subfields: Business and International Management, Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/5ae8c23376259ef98f07709dffc1af6cc2a8683e

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Citations in the corpus

Interventions to Improve the Labour Market Outcomes of Youth: A Systematic Review of Training, Entrepreneurship Promotion, Employment Services and Subsidized Employment Interventions (2017, background): “Since the scope of formal wage employment is often limited in developing countries, increasing (formal) self-employment among the labour force is considered an important anti-poverty strategy (Gindling & Newhouse, 2012).”
Labour Market Effects of Large-Scale Agricultural Investment: Conceptual Considerations and Estimated Employment Effects (2017, background): “4 Over two-thirds of farming activities are performed by selfemployed individuals (Gindling & Newhouse, 2014); wage and salary employees are mainly found in the processing industry.”
Psychological capital and the startup capital–entrepreneurial success relationship (2016, background): “A bitter reality in the case of developing countries is the mismatch between the increase in entrepreneurial activities and the disturbingly low rates of success (Gindling and Newhouse 2014).”
The Persistent Power of Behavioral Change: Long-Run Impacts of Temporary Savings Subsidies for the Poor (2018, background): “The majority of individuals in developing countries are self-employed in some way, either in agriculture or in small non-agricultural businesses (Gindling and Newhouse 2012).”
Entrepreneurship Education and Entry into Self-Employment Among University Graduates (2016, background): “In developing countries, only a small share of the labor-force is employed in wage jobs (Gindling & Newhouse, 2014).”
Who are the Poor in the Developing World (2016, background): “Alvarez-Cuadrado and Poshke (2012) and Gindling and Newhouse (2014) provide more recent empirical evidence on the earnings penalties faced by agricultural workers in developing countries.”
Micro-entrepreneurship and subjective well-being: Evidence from rural Bangladesh (2019, background): “1 Developing countries abound with entrepreneurial energy and generally have higher self-employment rates than their wealthier counterparts (Gindling and Newhouse, 2014).”
The Quality of Employment (QoE) in nine Latin American countries: A multidimensional perspective (2020, neutral): “the problems of informal employment and Gindling and Newhouse (2014)for a discussion of definitions. K. Sehnbruch et al. /World Development 127 (2020) 104738 7”
The Firm Size Distribution Across Countries and Skill-Biased Change in Entrepreneurial Technology (2018, background): “The self-employed in Gollin (2007) also have relatively high entrepreneurial ability and potential wages.”
Entrepreneurship Programs in Developing Countries: A Meta Regression Analysis (2013, background): “1 This is particularly pressing in developing countries where wage and salary employment is limited and the majority of jobs are created and operated in self employment (Haltiwanger et al., 2010; Ayyagari et al., 2011; Gindling and Newhouse, 2012).”
Skills and Youth Entrepreneurship in Africa: Analysis with Evidence from Swaziland (2014, positive): “Among recent research, Klinger and Schündeln (2014) found that in Central America, business training significantly increases the probability that a participant starts a new business or expands an existing one.”
Jobs for Shared Prosperity: Time for Action in the Middle East and North Africa (2013, background): “6.1 Signals important for hiring Source: Phone interview with recruiters, February 2012.”