Nonfarm Microenterprise Performance and the Investment Climate : Evidence from Rural Ethiopia

This paper uses uniquely matched household, enterprise and community survey data from four major regions in rural Ethiopia to characterize the performance, constraints and opportunities of nonfarm enterprises. The nonfarm enterprise sector is sizeable, particularly important for women, and plays an important role during the low season for agriculture, when alternative job opportunities are limited. Returns to nonfarm enterprise employment are low on average and especially so for female-headed enterprises. Women nevertheless have much higher participation rates than men, which attest to their marginalized position in the labor market. Most enterprises are very small and rely almost exclusively on household members to provide the required labor inputs. Few firms add to their capital stock or increase their labor inputs after startup. Local fluctuations in predicted crop performance affect the performance of nonfarm enterprises, because of the predominant role played by the agricultural sector. Enterprise performance is also affected by the localized nature of sales and limited market integration for nonfarm enterprises. The policy implications of these and other findings are discussed.

Bibliographic Details

Main Authors:	Loening, Josef, Rijkers, Bob, Söderbom, Måns
Language:	English
Published:	World Bank, Washington, DC 2008-03
Subjects:	ACCESS TO CREDIT, ACCESSIBILITY, ACCOUNTING, ADVERSE IMPACT, AGRICULTURAL ECONOMICS, AGRICULTURAL SECTOR, AGRICULTURE, ARBITRAGE, AVAILABILITY OF CREDIT, AVERAGE GROWTH, AVERAGE WAGE, BANK POLICY, BASIC COST, BRIBES, BUSINESS ECONOMICS, CALCULATIONS, CAPITAL STOCK, CAPITAL STOCKS, CASUAL WORKER, CASUAL WORKERS, COLLATERAL, COMMUNITY SURVEY, COMPETITORS, CONSTANT RETURNS TO SCALE, CONSUMERS, CONTRIBUTION, CONTRIBUTIONS, COOPERATIVES, COST OF LABOR, CREDIT AVAILABILITY, CREDIT CONSTRAINTS, DAILY WAGE, DAILY WAGES, DEVELOPING COUNTRIES, DIVERSIFICATION, DIVERSIFICATION STRATEGIES, DROUGHT, DROUGHTS, DUMMY VARIABLE, DUMMY VARIABLES, EARNINGS, ECONOMETRICS, ECONOMIC DEVELOPMENT, ECONOMIC GEOGRAPHY, ECONOMIC INTEGRATION, EDUCATIONAL ATTAINMENT, EMPLOYEE, EMPLOYMENT, ENTERPRISE GROWTH, ENTERPRISE PERFORMANCE, ENTERPRISE SIZE, ENTREPRENEURS, ENTREPRENEURSHIP, EQUIPMENT, EXCHANGE RATE, EXPANSION, EXPENDITURE, EXTRA CASH, FARM ENTERPRISE, FINANCIAL CAPACITY, FINANCIAL INSTITUTION, FINANCIAL INSTITUTIONS, FINANCIAL POSITION, FINANCIAL SERVICES, FINANCIAL SUPPORT, FIRM PERFORMANCE, FIRM SIZE, FOOD SHORTAGE, FORMAL BANKS, FORMAL CREDIT, GENDER, GENDER BIASES, GENDER GAP, HOLDING, HOUSEHOLD EXPENDITURE, HOUSEHOLD INCOME, HOUSEHOLDS, INCOME EFFECT, INDUSTRIAL ECONOMICS, INFORMATION GAP, INITIAL CAPITAL, INTERNATIONAL BANK, INVESTING, INVESTMENT BEHAVIOR, INVESTMENT CLIMATE, INVESTMENT CLIMATE ASSESSMENT, INVESTMENT FINANCE, INVESTMENT SPENDING, JOB LOSS, JOB OPPORTUNITIES, KNOWLEDGE GAP, LABOR FORCE, LABOR MARKET, LABOR MARKETS, LARGE ENTERPRISES, LARGE FIRMS, LENDERS, LIQUIDITY, LOCAL FINANCIAL INSTITUTION, LOCAL MARKET, LOW COST, MARKET INTEGRATION, MARKETING, MICRO-ENTERPRISES, MICRO-FINANCE, MICROENTERPRISES, OPERATING COST, OPERATING COSTS, OPPORTUNITY COST, PEOPLES, PERMANENT WORKER, PERMANENT WORKERS, POOR ACCESS, POOR INVESTMENT, PRIVATE ENTREPRENEURS, PROBABILITIES, PROBABILITY, PRODUCTION FUNCTION, PRODUCTION FUNCTIONS, PRODUCTIVITY, PROFITABILITY, PROVIDERS OF CREDIT, QUESTIONNAIRE, RETURN, RETURNS, SALE, SALES, SALES GROWTH, SHOP, SHOPS, SMALL BUSINESS, SMALL ENTERPRISE, SMALL ENTERPRISES, SMALL FIRM, SMALL FIRMS, SOURCE OF INCOME, START-UP, SUBSTITUTION EFFECT, SUNK COSTS, TELECOMMUNICATIONS, TRADE SECTOR, TRADING, TRANSITION ECONOMIES, TYPES OF LENDERS, VALUE ADDED, VILLAGE, VILLAGES, WAGE, WAGE RATES, WOMAN,
Online Access:	http://documents.worldbank.org/curated/en/2008/03/9161814/nonfarm-microenterprise-performance-investment-climate-evidence-rural-ethiopia https://hdl.handle.net/10986/6506
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