Who are the Microenterprise Owners? Evidence from Sri Lanka on Tokman v. De Soto

By S. D. Mel, David J. McKenzie, Christopher Woodruff. Social Science Research Network, 2008

173 citations recorded by the source corpus.

Is the vast army of the self-employed in low income countries a source of employment generation? This paper uses 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. The authors use a rich set of measures of background, ability, and attitudes, including lottery experiments measuring risk attitudes. Consistent with the International Labor Organization's views of the self employed (represented by Tokman), the analysis finds that two-thirds to three-quarters 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, the authors 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 results suggest 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.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/c820514fc5c82f56fc3181edc8798ca50fb1d2be

Citations in the corpus

• Informality and Development (2014, unknown): “In a similar vein, de Mel, McKenzie, and Woodruff (2008) find that roughly 70 percent of own-account workers in Sri Lanka have backgrounds, abilities, and attitudes more similar to those of wage workers than those of owners of firms and that they rarely expand by adding paid employees (see also…”
• Return Migration and Occupational Choice (2009, unknown): “de Mel et al. (2008) observe that for a substantial part of the self-employed in Sri Lanka, the lack of growth from working on own account compared to a small or medium size enterprise is more likely to be due to the lack of entrepreneurial abilities.”
• Entrepreneurship Programs in Developing Countries: A Meta Regression Analysis (2013, unknown): “…sales: + De Mel et al. (2008a) Microent erprise owners Sri Lanka Lower middle income South Asia 2008 39 Cash/in-kind transfer Profits: + (male) De Mel et al. (2008b) Microent erprise owners Sri Lanka Lower middle income South Asia 2007 26 Small or large cash, or in-kind equipment Profits,…”
• Self-Employment in the Developing World (2012, unknown): “Although there has been research investigating the heterogeneity of the selfemployed in several countries (i.e., de Mel et al., 2010; Djankov, Miguel, Qian, Roland, & Zhuravskaya, 2005; Djankov, Qian, Roland, & Zhuravskaya, 2006; Grimm et al., 2012), this is to our knowledge the first analysis that…”
• Capital Is Not Enough: Innovation in Developing Economies (2012, unknown): “Thus, political and social connections should matter more when institutional environments are hostile (De Mel et al., 2008).”
• Bank Financing for SMEs – Lessons from the Literature (2013, unknown): “…(McKenzie and Weber, 2009), Bosnia and Herzegovina (Bruhn and Zia, 2013), Peru (Karlan and Valdivia, 2011), Dominican Republic (Fischer, Drexler and Schoar, 2010), Sri Lanka (De Mel, McKenzie and Woodruff, 2012), Pakistan (Gine and Mansuri, 2011) and Central America (Klinger and Schündeln, 2011).”
• Household Enterprises in Sub-Saharan Africa : Why They Matter for Growth, Jobs, and Livelihoods (2012, unknown): “…in recognition of importance of the ability to hire workers from outside the household as an indicator of managerial ability and growth potential, and therefore the probability of a different response to a particular policy or program from MEs compared with HEs (see de Mel et al, 2008 and 2009).”
• Innovative Firms or Innovative Owners? Determinants of Innovation in Micro, Small, and Medium Enterprises (2009, unknown): “However, in previous work (de Mel et al. 2008) we have found that this measure does help distinguish own account workers from both wage workers and owners of larger firms.”
• Firm Dynamics, Productivity Growth, and Job Creation in Developing Countries: The Role of Micro- and Small Enterprises (2015, unknown): “Based on data from a randomized experiment in Sri Lanka, De Mel, McKenzie, and Woodruff (2008) found the marginal returns to capital in micro-enterprises to be 4.6 to 5.3 percent per month – substantially higher than market interest rates.”
• Catastrophes and time preference: Evidence from the Indian Ocean Earthquake (2015, unknown): “The survey of wage workers we use, which elicited measures of patience using a matching task, are described in detail in de Mel et al. (2008).”