The Pecuniary and Non-Pecuniary Returns to Micro-Entrepreneurship: Evidence from a Cross-Section of Women in Mexico

Benjamin Williams, Jesica Torres Coronado and David C. Francis

No 11033, Policy Research Working Paper Series from The World Bank

Abstract: This paper estimates the monetary and full returns to micro-entrepreneurship using a cross-section of Mexican women leveraging self-reported reservation wages. A generalized Roy model of micro-entrepreneurship choice that accounts for selection bias and non-response in earnings is estimated. The analysis exploits variation in homicide rates as an exclusion restriction to identify the average treatment-on-the-treated. The average monetary return is 4.2 percent while the average full return is 68 percent, which points to substantial non-pecuniary benefits from entrepreneurship among women. The monetary return sharply increases with years of schooling. Full returns are less steep, suggesting that non-pecuniary benefits are more salient for less educated women.

Date: 2025-01-13
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