The Nature of Self-Employment in Indonesia: Entrepreneurship or Survival Strategy?

Esa A. Asyahid () and Elan Satriawan
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Esa A. Asyahid: Department of Economics, Faculty of Economics & Business, Universitas Gadjah Mada

No 202403002, Gadjah Mada Economics Working Paper Series from Department of Economics, Faculty of Economics and Business, Universitas Gadjah Mada

Abstract: The dualistic market model suggests that self-employment in developing countries should be seen as a survival strategy that is taken by those who are locked out of the formal labour market rather than as a manifestation of entrepreneurial spirit. This study aims to provide empirical evidences on the nature of self-employment in Indonesia, and whether it is more appropriately seen as an entrepreneurial activity or merely as a survival mechanism, by examining self-employed workers’ characteristics and the determinants of entry and exit into the self-employment sector. Utilising individual-level panel data from the Indonesian Family Life Survey, this study finds that the self-employment sector in Indonesia is indeed better characterised as a survival strategy as in the dualistic market model. Moreover, entry into the self-employment sector arises in times of economic crisis, implying that it acts as an employment option, namely as a last resort. Consequently, instead of focusing on growing the business of self-employed workers, policies should be directed toward the relaxation of formal labour market entry constraints‒providing more decent jobs and protecting the livelihood of existing self-employed workers.

Keywords: Self-Employment; Indonesia; Dualistic Market Model (search for similar items in EconPapers)
JEL-codes: E26 J46 O17 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2024-03
New Economics Papers: this item is included in nep-ent, nep-iue, nep-sbm and nep-sea
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