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.
Entrepreneurship; Family Solidarity; Formal Sector; Africa;
- 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
- O55: Africa
Philippe Alby, Emmanuelle Auriol, and Pierre Nguimkeu, “Does Social Pressure Hinder Entrepreneurship in Africa? The Forced Mutual Help Hypothesis”, TSE Working Paper, n. 18-956, September 2018.
Economica, 2019, forthcoming