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Entrepreneurship versus Joblessness - Explaining the Rise in Self-Employment

Luke Haywood and Paolo Falco

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

Abstract: The self-employed constitute a large proportion of the workforce in developing countries and the sector has been found to be growing further. Different accounts exist as to the cause of this development, with pull factors such as high returns to capital and increased wealth contrasted with push factors such as barriers to entry into the wage sectors following traditional segmeted labour market models. This article considers changes in the structure of earnings for the self-employed in Ghana and compares them with the wage employed. Models of segmented labour markets typically consider sorting on unobservables to be important, and often posit a sector choice model. If there are barriers to entry into one of the sectors, however, selection on unobservables there may be no clear selection rule. We apply a simple model of a two-sector labour market and estimate earnings using a correlated random coef cients model that allows for multiple patterns of sorting and selection on unobservables using instrumental variables GMM. We nd evidence of increasing return to productive characteristics for the self-employed, but also a large wage premium.

JEL-codes: O12 J31 J42 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-dev, nep-ent and nep-iue
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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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