Does forced solidarity hamper investment in small and micro enterprises?

Michael Grimm, Renate Hartwig and Jann Lay

Journal of Comparative Economics, 2017, vol. 45, issue 4, 827-846

Abstract: Summary: Previous research has shown that small firms in poor countries achieve high marginal returns to capital but show low reinvestment rates. We investigate whether transfers motivated by risk sharing and forced redistribution can explain this pattern and may therefore hamper private sector development. The idea is that the more redistribution distorts the fairness of insurance, the more potentially successful entrepreneurs may be hindered to undertake profitable investments. The empirical results based on a sample of small firms operating in Burkina Faso support the main propositions of this paper.

Keywords: Extended family network; Investment; Private transfer; Solidarity tax; Africa; Burkina Faso (search for similar items in EconPapers)
JEL-codes: D13 D92 O12 O43 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0147596716300336
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Does Forced Solidarity Hamper Investment in Small and Micro Enterprises? (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:45:y:2017:i:4:p:827-846

DOI: 10.1016/j.jce.2016.07.002

Access Statistics for this article

Journal of Comparative Economics is currently edited by D. Berkowitz and G. Roland

More articles in Journal of Comparative Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().