Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa
This paper investigates the patterns of capital entry barriers and capital returns in informal Micro and Small Enterprises (MSE's) using a unique micro data set seven West-African countries. The author's findings support the view of a het...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/195371468313855766/Barriers-to-entry-and-returns-to-capital-in-informal-activities-evidence-from-Sub-Saharan-Africa http://hdl.handle.net/10986/27365 |
| Summary: | This paper investigates the patterns of
capital entry barriers and capital returns in informal Micro
and Small Enterprises (MSE's) using a unique micro data
set seven West-African countries. The author's findings
support the view of a heterogeneous informal sector that is
not primarily host to subsistence activities. While an
assessment of initial investment identifies some informal
activities with negligible entry barriers, a notable cost of
entry is associated to most activities. The authors find
very heterogeneous patterns of capital returns in informal
MSE's. At very low levels of capital, marginal returns
are extremely high- often exceeding 70 percent per month.
Above a capital stock of 150 international dollars, marginal
returns are found to be relatively low at around 4 to 7
percent monthly. The authors provide some evidence that the
high returns at low capital stocks reflect high risks. At
the same time, most MSE's appear to be severely capital constrained. |
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