Viability of Self-Employment

Journal of Development Studies, Vol. 45, No. 7, pp. 1070–1092, August 2009

24 Pages Posted: 6 Jun 2012

See all articles by Minsoo Lee

Minsoo Lee

Asian Development Bank

M. Nziramasanga

affiliation not provided to SSRN

S. Bhattacharjee

affiliation not provided to SSRN

Date Written: August 6, 2009

Abstract

Empirical studies on self-employment uniformly cite the high mortality rate in both developed and developing countries. Several studies on the entry into self-employment incorporate a savings constraint. Policy makers and international aid agencies have responded by providing credit to would-be entrepreneurs yet the mortality rate persists. We formulate a model of the viability of self-employment that incorporates the impact of cost perceptions at the time of entry. We use the ability to meet monthly loan repayment ratios as a measure of viability since loans are usually the largest explicit cost. Our results have important policy implications on the desirability of interest rate subsidies, the size of initial capital relative to market size and criteria for granting additional credit to existing enterprises.

Suggested Citation

Lee, Minsoo and Nziramasanga, M. and Bhattacharjee, S., Viability of Self-Employment (August 6, 2009). Journal of Development Studies, Vol. 45, No. 7, pp. 1070–1092, August 2009, Available at SSRN: https://ssrn.com/abstract=2078753

Minsoo Lee (Contact Author)

Asian Development Bank ( email )

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M. Nziramasanga

affiliation not provided to SSRN

S. Bhattacharjee

affiliation not provided to SSRN

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