This paper provides an analytical review of empirical studies into the impact of schooling on entrepreneurship selection and performance in less developed countries. We analyze the variation of this impact across various characteristics of studies. We find that a marginal year of schooling raises enterprise income by an average of 5.5 percent, which is closely similar to the average return in industrial countries. The return varies by gender, rural/urban residence, and the share of agriculture in the economy. Furthermore, more educated workers typically end up in wage employment but also prefer non-farm entrepreneurship to farming. The education effect that separates workers from self-employment into wage employment is stronger for women, possibly stronger in urban areas, and also stronger in the least developed economies where agriculture is more dominant and literacy rates are lower.

Entrepreneurship Selection and Performance: A Meta-Analysis of the Impact of Education in Developing Economies

This meta-analytical review of empirical studies of the impact of schooling on entrepreneurship in selection and performance in developing economies looks at variations impact across specific characteristics of the studies. A marginal year of schooling in developing economies raises enterprise income by an average of 5.5 percent, which is close to the average return in industrial countries. The return varies, however, by gender, rural or urban residence, and the share of agriculture in the economy. Furthermore, more educated workers typically end up in wage employment and prefer nonfarm entrepreneurship to farming. The education effect that separates workers into self-employment and wage employment is stronger for women, possibly stronger in urban areas, and also stronger in the least developed economies, where agriculture is more dominant and literacy rates are lower.

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Casual work and poverty in Third World cities

We analyze wage differentials mobility between the formal and informal sector in urban Mexico, using panel data on five quarters drawn from Mexico's Urban Employment Survey. We develop a dynamic random effects panel data model. It consists of two separate wage equations for the two sectors and a multinomial logit part explaining the labor market state, in which wages are included as explanatory variables. The model is estimated using simulated maximum likelihood. The estimates show that wage differentials increase with education level. The probability of formal sector employment strongly increases with the wage differential. Simulated transition probabilities show that for male workers, the choice between formal and informal sector is driven by wage differentials and unobserved heterogeneity, while true state dependence is much less important. For women, nonparticipation is the most common labor market state, and true state dependence plays a much larger role.

Wage Differentials and Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico

https://www.econstor.eu/bitstream/10419/21186/1/dp329.pdf

Wage differentials and mobility in the urban labour market: a panel data analysis for Mexico

Dwellings can provide not only shelter and amenities but also an income through rental space or use as a shop. Such income helps to finance the dwelling and its improvement. But policymakers have often opposed work-at-home urban design because of devotion to unifunctional land use theories and because of a moralistic bias against private economic gain from social housing support. Moreover, home businesses are thought to be unproductive sweatshops with no future. Yet these capital-generating, capital-saving home enterprises remain almost as widespread in LDCs as they were in Europe before the Industrial Revolution. Briefly in vogue during the 1950s, cottage industries faded from popularity after the wasteful experience in India. Stress on the "informal sector" came after 1971 but has not been concerned with the location of small enterprises. The thesis of this article is that location and related costs and opportunities do matter and that better policies can improve income, employment, and housing. I begin with a review of the literature and note that, except for economic historians, most writers have ignored location. With data from Peru, Sri Lanka, and Zambia, I show that home-based enterprises (HBEs) mobilize resources effectively and increase national product. Although they are more than merely redistributive, their proliferation is nevertheless consistent with more equitable income distribution. In most countries, HBEs will proliferate before declining in numbers, but some types will fare better than others. Examining the data, I found that classification of types should be not only in terms of specific products or services but should also take into account traits of the household and its neighborhood. I will show how the changing composition of HBEs is related to their competitiveness or complementarity with the modern sector. What is their share of employment and their contri-

Home-based Enterprises in Cities of Developing Countries*

As a trustworthy progenitor ofjobs, the construction sector has been in and out of favor with economists. Some decades ago many agreed with Adam Smith that "no species of skilled labor . .. seems more easy to learn than that of masons or bricklayers."' As an extra advantage, the complementarity of such work with other inputs, except for materials, was thought to be low. Thus Arthur Lewis wrote in the 1950s that "buildings can be created by human labor with hardly any capital to speak of,'"2 and Nurkse found construction a splendid outlet for "surplus labor,"'3 the ideal entry chamber for rural-urban migrants. "On the whole," wrote W. B. Reddaway, "this is an industry which has relatively little in the way of 'supply difficulties.' "4 With experience, however, came doubts about the ease of substituting unskilled labor for other factors of production in making buildings. Summarizing World Bank experience, Albert Waterston noted unexpectedly high costs, long delays, "the use of defective or other improper materials, poor workmanship," and so forth resulting in "works or facilities which either cannot perform as expected or soon deteriorate."'' After a detailed analysis of Kenyan residential building, Gordon Hughes stated that "housing projects cannot be considered a particularly good way of generating employment for unskilled workers unless . . . the requisite supply of skilled labor is assured. This would be difficult at the present time in Kenya, and the position would seem to be the same in many other African countries."6 A group of experts convened in 1976 by the United Nations Center for Human Settlements, however, concluded that "it is generally agreed that it is relatively easy to train skilled labor through, for example, 9 to 12 month training programs at a government training center. The main difficulties

Employment in Construction: Multicountry Estimates of Costs and Substitution Elasticities for Small Dwellings

Migration and urban unemployment, along with solicitude for the environment, have raised the priority for housing in development policy. The layman finds it remarkable that society lets surplus labor build shacks in gullies instead of regular housing. The economist knows that commercial construction cannot reach the poor or even lower middle groups without a subsidy because monthly payments or rents would be too high. Subsidies are therefore advocated in the form of free sites, physical units like plumbing cores, subsidized components, cash grants, tax incentives, cheap credit (unduly low down payments, interest rates, or long maturities), and subsidized or uncollected rent.

W. Paul Strassmann

Papers

Home-based Enterprises in Cities of Developing Countries*

Employment in Construction: Multicountry Estimates of Costs and Substitution Elasticities for Small Dwellings

Measuring the Employment Effects of Housing Policies in Developing Countries