Date & time
Friday 25 June 2010
Seminar Room 1, Stanner Building (37), Lennox Crossing, ANU
Russell Toth, PhD Candidate, Cornell University
What are the factors behind the emergence of higher-value enterprise activity in developing countries, particularly at the household level? This question is important for understanding the micro-mechanisms of development, and is of growing interest to a number of parties. Significant existing literature focuses on the role of credit market failures in inhibiting the emergence and growth of micro and small enterprises, yet emerging evidence on credit market interventions seems to suggest that credit access is not the whole story. In order to explain such evidence and other stylized facts regarding household enterprise activity in the developing country setting, I develop a theory of the formation of the specialized human capital necessary to run an enterprise, and show how it can interact with credit market failures. I then provide evidence for the theory using a uniquely suitable dataset, the Indonesia Family Life Survey. In particular, the dataset contains a large enough cross section such that we can observe enterprise dynamics at firm sizes not typically observed in household surveys, allowing for the distinction between ‘opportunityŸ? and ‘necessityŸ? self-employed that is important in the entrepreneurship literature, while connecting such observations to individual and household characteristics.