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Does Social Pressure Hinder Entrepreneurship in Africa? The Forced Mutual Help Hypothesis

Alby, Philippe, Auriol, Emmanuelle and Nguimkeu, Pierre (2018) Does Social Pressure Hinder Entrepreneurship in Africa? The Forced Mutual Help Hypothesis. TSE Working Paper, n. 18-956, Toulouse

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In the absence of a public safety net, wealthy Africans have the social obligation to share their re- sources with their needy relatives in the form of cash transfers and inefficient family hiring. We develop a model of entrepreneurial choice that accounts for this social redistributive constraint. We derive pre- dictions regarding employment choices, productivity, and profitability of firms ran by entrepreneurs of African versus non-African origin. Everything else equal, local firms are over-staffed and less productive than firms owned by nonlocals, which discourages local entrepreneurship. Using data from the manu- facturing sector, we illustrate the theory by structurally estimating the proportion of missing African entrepreneurs. Our estimates, which are suggestive due to the data limitation, vary between 8% and 12.6% of the formal sector workforce. Implications for the role of social protection are discussed.

Item Type: Monograph (Working Paper)
Language: English
Date: September 2018
Place of Publication: Toulouse
Uncontrolled Keywords: Entrepreneurship, Family Solidarity, Formal Sector, Africa
JEL Classification: C51 - Model Construction and Estimation
H53 - Government Expenditures and Welfare Programs
H55 - Social Security and Public Pensions
O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
O17 - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements - Legal, Social, Economic, and Political
O55 - Africa
Divisions: TSE-R (Toulouse)
Institution: Toulouse Capitole University
Site: UT1
Date Deposited: 28 Sep 2018 14:36
Last Modified: 04 Apr 2019 05:51
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