Involuntary entrepreneurship – Evidence from Thai urban data

Alexander Karaivanov and Tenzin Yindok

World Development, 2022, vol. 149, issue C

Abstract: We structurally estimate a model of occupational choice between wage work and entrepreneurship which allows for ‘involuntary entrepreneurship’ (running a business out of necessity). Involuntary entrepreneurs would earn higher income as workers but cannot access a wage job because of labor market frictions. Using Thai urban household data, we estimate the share of involuntary entrepreneurs as 19% of all businesses in our sample, with robustness runs yielding a range from as low as 7% to as high as 25%, depending on the data stratification and empirical specification. Involuntary entrepreneurs earn significantly lower income (85% less on average) than the rest of the entrepreneurs and are more likely among low-wealth and low-schooling households. Decomposing the estimated effects of the labor and credit market frictions, our results imply 18.7% excess (involuntary) entrepreneurs because of labor market frictions and 0.6% fewer entrepreneurs because of credit frictions, both relative to the unconstrained optimum. Counterfactual policy evaluations show that involuntary entrepreneurship can only be reduced by directly targeting labor market frictions, with attention paid to the equilibrium effect on the market wage.

Keywords: Entrepreneurship; Involuntary entrepreneurs; Necessity entrepreneurs; Credit constraints; Labor market frictions; Structural estimation (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0305750X21003211
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Involuntary Entrepreneurship - Evidence from Thai Urban Data (2016)
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:wdevel:v:149:y:2022:i:c:s0305750x21003211

DOI: 10.1016/j.worlddev.2021.105706

Access Statistics for this article

World Development is currently edited by O. T. Coomes

More articles in World Development from Elsevier
Bibliographic data for series maintained by Catherine Liu ().