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Does Social Pressure Hinder Entrepreneurship in Africa? The Forced Mutual Help Hypothesis

Philippe Alby, Emmanuelle Auriol () and Pierre Nguimkeu

No 18-956, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: In the absence of a public safety net, wealthy Africans have the social obligation to share their re- sources with their needy relatives in the form of cash transfers and inefficient family hiring. We develop a model of entrepreneurial choice that accounts for this social redistributive constraint. We derive pre- dictions regarding employment choices, productivity, and profitability of firms ran by entrepreneurs of African versus non-African origin. Everything else equal, local firms are over-staffed and less productive than firms owned by nonlocals, which discourages local entrepreneurship. Using data from the manu- facturing sector, we illustrate the theory by structurally estimating the proportion of missing African entrepreneurs. Our estimates, which are suggestive due to the data limitation, vary between 8% and 12.6% of the formal sector workforce. Implications for the role of social protection are discussed.

Keywords: Entrepreneurship; Family Solidarity; Formal Sector; Africa (search for similar items in EconPapers)
JEL-codes: C51 H53 H55 O14 O17 O55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-ent
Date: 2018-09
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