Who Are the Microenterprise Owners? Evidence from Sri Lanka on Tokman v. de Soto

Is the vast army of the self-employed in low income countries a source of employment generation? This paper uses data from surveys in Sri Lanka to compare the characteristics of own account workers (non-employers) with wage workers and with owners of larger firms. The authors use a rich set of measures of background, ability, and attitudes, including lottery experiments measuring risk attitudes. Consistent with the International Labor Organization's views of the self employed (represented by Tokman), the analysis finds that two-thirds to three-quarters of the own account workers have characteristics which are more like wage workers than larger firm owners. This suggests the majority of the own account workers are unlikely to become employers. Using a two and a half year panel of enterprises, the authors show that the minority of own account workers who are more like larger firm owners are more likely to expand by adding paid employees. The results suggest that finance is not the sole constraint to growth of microenterprises, and provides an explanation for the low rates of growth of enterprises supported by microlending.

Bibliographic Details

Main Authors:	de Mel, Suresh, McKenzie, David, Woodruff, Christopher
Language:	English
Published:	World Bank, Washington, DC 2008-05
Subjects:	ACCESS TO CREDIT, ATTRITION, BUSINESS SCHOOL, CURRENT JOBS, DEVELOPMENT BANK, EARNINGS, EMPLOYEE, EMPLOYMENT, EMPLOYMENT GENERATION, EMPLOYMENT GROWTH, ENTREPRENEUR, ENTREPRENEURIAL ABILITY, ENTREPRENEURIAL ACTIVITY, ENTREPRENEURS, ENTREPRENEURSHIP, ENTRY COSTS, EXOGENOUS SHOCKS, FINANCIAL CAPITAL, FINANCIAL CONSTRAINTS, FINANCIAL LITERACY, FINANCIAL LITERACY TESTS, FINANCIAL RISK, FINANCIAL RISKS, FINANCIAL SUPPORT, FIRING COSTS, FIRM SIZE, FIRM SIZE DISTRIBUTION, FIRM SURVEYS, FIRMS, HIGHER INCOMES, HOUSEHOLD WEALTH, HUMAN CAPITAL, INCOME LEVELS, INFORMAL SECTOR, INFORMATION SYSTEMS, JOB CREATION, JOB GENERATION, JOB SEARCH, JOBS, LABOR ECONOMICS, LABOR FORCE, LABOR MARKET, LABOR MARKET DYNAMICS, LABOR MARKETS, LABOR ORGANIZATION, LABOR REGULATIONS, LARGE FIRM, LATIN AMERICAN, LAWYER, LEARNING, LITERACY, LITERATURE, LOW INCOME, LOW-INCOME, MANUFACTURERS, MBA, MICROENTERPRISES, MICROFINANCE, OCCUPATION, OCCUPATIONAL CHOICE, PAID WORKERS, PAPERS, POVERTY ALLEVIATION, PREVIOUS WAGE, PROBABILITY, PRODUCTIVE EMPLOYMENT, RATES OF GROWTH, RESEARCH ASSISTANCE, RESEARCHERS, RETIREMENT, RISK AVERSION, SAFETY NET, SALES, SAVINGS, SAVINGS BEHAVIOR, SECONDARY SCHOOL, SELF EMPLOYED, SELF EMPLOYMENT, SELF-EMPLOYMENT, SHOP, SHOPS, SMALL BUSINESSES, SME, TEACHERS, UNDERGRADUATES, UNEMPLOYMENT, UNIVERSITIES, URBAN UNEMPLOYMENT, VALUABLE, WAGES, WORK IN PROGRESS, WORKER, WORKERS, WORKING, WORKING LIFE, WORTH,
Online Access:	http://documents.worldbank.org/curated/en/2008/05/9474330/microenterprise-owners-evidence-sri-lanka-tokman-v-de-soto https://hdl.handle.net/10986/6696
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