Abstract
We report on the prevalence and patterns of non-farm enterprises in six sub-Saharan African countries, and study their performance in terms of labor productivity, survival and exit, using the World Bank’s Living Standards Measurement Study - Integrated Surveys on Agriculture (LSMS-ISA). Rural households operate enterprises due to both push and pull factors and tend to do so predominantly in easy-to-enter activities, such as sales and trade, rather than in activities that require higher starting costs, such as transport services, or educational investment, such as professional services. Labor productivity differs widely: rural and female-headed enterprises, those located further away from population centers, and businesses that operate intermittently have lower levels of labor productivity compared to urban and male-owned enterprises, or enterprises that operate throughout the year. Finally, rural enterprises exit the market primarily due to a lack of profitability or finance, and due to idiosyncratic shocks.
Highlights
A significant number of rural households in sub-Saharan Africa do not limit labor allocation to agriculture, and operate and work in non-farm enterprises (Reardon et al, 2006).1 Over time the contribution of these enterprises to household incomes and employment has increased rather than decreased, as some development economists in the 1960s and 70s expected (Lanjouw and⇑ Corresponding author.Lanjouw, 2001; Start, 2001; Haggblade et al, 2010)
Most existing empirical work on African entrepreneurship is based on one-period, single-country and rather limited survey data
Summarizing the literature survey, we conclude that non-farm enterprises in rural Africa are small, informal businesses operated due to both necessity and opportunity, and contributing with a significant share to rural household incomes
Summary
A significant number of rural households in sub-Saharan Africa do not limit labor allocation to agriculture, and operate and work in non-farm enterprises (Reardon et al, 2006). Over time the contribution of these enterprises to household incomes and employment has increased rather than decreased, as some development economists in the 1960s and 70s expected Lanjouw, 2001; Start, 2001; Haggblade et al, 2010) This contribution is unlikely to diminish in the future given that rural businesses will be needed to support the job creation for the roughly 170 million new job seekers entering Africa’s labor market between 2010 and 2020 (Fox and Pimhidzai, 2013). In this regard it is useful to have an up-to-date and accurate profile of the prevalence, patterns and performance of rural enterprises.
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