Article

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

Philippe Alby, Emmanuelle Auriol, and Pierre Nguimkeu

Abstract

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.

Keywords

Entrepreneurship; Family Solidarity; Formal Sector; Africa;

JEL codes

  • 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

Replaces

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.

Reference

Philippe Alby, Emmanuelle Auriol, and Pierre Nguimkeu, Does Social Pressure Hinder Entrepreneurship in Africa? The Forced Mutual Help Hypothesis, Economica, vol. 87, n. 346, April 2020, pp. 299–327.

Published in

Economica, vol. 87, n. 346, April 2020, pp. 299–327