Business Ownership and Self-Employment in Developing Economies

Abstract

Abstract The self-employed and entrepreneurs are fundamentally different and thus might react asymmetrically to economic shocks. The transition between the self-employed, entrepreneurs, and employees is examined using a large-scale data set from the Columbian National Household Survey. The panel nature of the data allows one to look at the transition across occupations, particularly between self-employment and entrepreneurship. As in the prior studies, the case of Columbia highlights that the self-employed tend to be less educated and poorer than business owners. They also tend to be more likely to be operating in the informal economy and in the service sector. This chapter explores the question of whether “pure” self-employment in this environment is a form of or a path to entrepreneurship; and whether individuals in developing economies who choose to work by themselves tend to have the same characteristics, motivations, and occupational dynamics as those who clearly run firms that employ others. The characterization of entrepreneurship in Colombia suggests that there are important differences between self-employment and business ownership. These two commonly used definitions of entrepreneurship differ in important dimensions, such as education and the economic sector.

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