Working Paper: CEPR ID: DP3026
Authors: Alice Mesnard; Martin Ravallion
Abstract: The extent of entrepreneurial activity in an economy with poorly developed capital markets depends on the distribution of wealth, though in potentially complex ways. A non-parametric model of the wealth effect on self-employment is estimated using micro data on the occupational choices of return migrants in Tunisia. Controls for heterogeneity are included, and tests are made for selection bias and separability between wealth and the controls. There is no sign of increasing returns at low wealth, suggesting generally low start-up costs in this setting. The aggregate self-employment rate is an increasing function of aggregate wealth, but a decreasing function of wealth inequality, though even substantial redistributions of wealth would have only a small impact.
Keywords: borrowing constraints; migration; self-employment; wealth inequality
JEL Codes: D31; M13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Aggregate wealth (E21) | Self-employment rate (J23) |
| Wealth inequality (D31) | Self-employment rate (J23) |