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Entrepreneurship versus Joblessness: Explaining the Rise in Self-Employment

Paolo Falco and Luke Haywood

No 1334, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

Abstract: The self-employed constitute a large proportion of the workforce in developing countries and the sector is growing. Different accounts exist as to the causes of this development, with pull factors such as high returns to capital contrasted with push factors such as barriers to more desirable salaried jobs. Using data from Ghana, we investigate the changing structure of earnings in self-employment relative to salaried work. We decompose earnings in a two-sector labour market allowing for flexible patterns of sorting on unobservables by means of a correlated random coefficient model estimated by IV-GMM. A unique panel dataset provides us with suitable instruments to tackle the endogeneity of sector choice and capital accumulation. We show that returns to productive characteristics in SE have increased significantly over the period 2004-11 and the sector has attracted workers with higher skills. We conclude that pull factors have significantly strengthened, pointing against the grim view of self-employment as an occupation of last resort.

Keywords: Self-employment; semiparametric models; comparative advantage; segmentation; African labour markets (search for similar items in EconPapers)
JEL-codes: C14 J24 J42 O15 (search for similar items in EconPapers)
Pages: 57 p.
Date: 2013
New Economics Papers: this item is included in nep-afr, nep-dev, nep-ent, nep-iue and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Entrepreneurship versus joblessness: Explaining the rise in self-employment (2016) Downloads
Journal Article: Entrepreneurship versus joblessness: Explaining the rise in self-employment (2016) Downloads
Working Paper: Entrepreneurship versus Joblessness - Explaining the Rise in Self-Employment (2013) Downloads
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