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...

Full description

Bibliographic Details
Main Authors: Grimm, Michael, Kruger, Jens, Lay, Jann
Format: Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2017
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
id okr-10986-27365
recordtype oai_dc
spelling okr-10986-273652021-04-23T14:04:41Z Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa Grimm, Michael Kruger, Jens Lay, Jann ACCESS TO CAPITAL ACCOUNTS BANK POLICY BARRIER TO ENTRY BORROWING CAPACITY CAPACITY BUILDING CAPITAL ACCUMULATION CAPITAL ALLOCATIONS CAPITAL CONSTRAINT CAPITAL INVESTMENTS CAPITAL MARKET CAPITAL REQUIREMENTS CAPITAL STOCK CHECKS COLLATERAL CREDIT CONSTRAINTS CREDIT PROGRAMS CREDIT PROVIDERS CREDIT RATIONING CURRENCY DECREASING RETURNS DEVELOPING COUNTRY DEVELOPMENT ECONOMICS DISTRIBUTION OF WEALTH ECONOMIC CONSTRAINTS ECONOMIC DEVELOPMENT ECONOMIC GROWTH ELASTICITY ENTRY BARRIERS EQUIPMENT EXOGENOUS VARIABLES EXPENDITURE FACTOR RETURNS FINANCIAL SUPPORT FIRST YEAR FIXED COSTS GDP GDP PER CAPITA GROWTH THEORY HOUSEHOLD WEALTH INCOME DISTRIBUTION INCOME LEVELS INFORMAL CREDIT INSTRUMENT INTEREST PAYMENTS INVENTORY INVESTING INVESTMENT BEHAVIOR LABOR MARKETS LEVEL OF CAPITAL LIQUIDITY LIQUIDITY CONSTRAINTS MACROECONOMICS MARGINAL RATE OF RETURN MARGINAL RETURN TO CAPITAL MARKET CONSTRAINTS MARKET IMPERFECTIONS MICRO DATA MICRO-CREDIT MICROENTERPRISES MONEY LENDERS POLITICAL ECONOMY PORTFOLIOS PROFITABILITY PURCHASING POWER RATES OF RETURNS RETURNS RISK AVERSE RISK AVERSION STATIC ANALYSIS TAX TOTAL CAPITAL STOCK TRADE SECTOR TRADER TRADING TRUST FUND UNIT OF CAPITAL VALUE ADDED WEALTH 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. 2017-06-27T18:34:24Z 2017-06-27T18:34:24Z 2011-05 Working Paper 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 English en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research :: Working Paper Publications & Research Sub-Saharan Africa
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic ACCESS TO CAPITAL
ACCOUNTS
BANK POLICY
BARRIER TO ENTRY
BORROWING CAPACITY
CAPACITY BUILDING
CAPITAL ACCUMULATION
CAPITAL ALLOCATIONS
CAPITAL CONSTRAINT
CAPITAL INVESTMENTS
CAPITAL MARKET
CAPITAL REQUIREMENTS
CAPITAL STOCK
CHECKS
COLLATERAL
CREDIT CONSTRAINTS
CREDIT PROGRAMS
CREDIT PROVIDERS
CREDIT RATIONING
CURRENCY
DECREASING RETURNS
DEVELOPING COUNTRY
DEVELOPMENT ECONOMICS
DISTRIBUTION OF WEALTH
ECONOMIC CONSTRAINTS
ECONOMIC DEVELOPMENT
ECONOMIC GROWTH
ELASTICITY
ENTRY BARRIERS
EQUIPMENT
EXOGENOUS VARIABLES
EXPENDITURE
FACTOR RETURNS
FINANCIAL SUPPORT
FIRST YEAR
FIXED COSTS
GDP
GDP PER CAPITA
GROWTH THEORY
HOUSEHOLD WEALTH
INCOME DISTRIBUTION
INCOME LEVELS
INFORMAL CREDIT
INSTRUMENT
INTEREST PAYMENTS
INVENTORY
INVESTING
INVESTMENT BEHAVIOR
LABOR MARKETS
LEVEL OF CAPITAL
LIQUIDITY
LIQUIDITY CONSTRAINTS
MACROECONOMICS
MARGINAL RATE OF RETURN
MARGINAL RETURN TO CAPITAL
MARKET CONSTRAINTS
MARKET IMPERFECTIONS
MICRO DATA
MICRO-CREDIT
MICROENTERPRISES
MONEY LENDERS
POLITICAL ECONOMY
PORTFOLIOS
PROFITABILITY
PURCHASING POWER
RATES OF RETURNS
RETURNS
RISK AVERSE
RISK AVERSION
STATIC ANALYSIS
TAX
TOTAL CAPITAL STOCK
TRADE SECTOR
TRADER
TRADING
TRUST FUND
UNIT OF CAPITAL
VALUE ADDED
WEALTH
spellingShingle ACCESS TO CAPITAL
ACCOUNTS
BANK POLICY
BARRIER TO ENTRY
BORROWING CAPACITY
CAPACITY BUILDING
CAPITAL ACCUMULATION
CAPITAL ALLOCATIONS
CAPITAL CONSTRAINT
CAPITAL INVESTMENTS
CAPITAL MARKET
CAPITAL REQUIREMENTS
CAPITAL STOCK
CHECKS
COLLATERAL
CREDIT CONSTRAINTS
CREDIT PROGRAMS
CREDIT PROVIDERS
CREDIT RATIONING
CURRENCY
DECREASING RETURNS
DEVELOPING COUNTRY
DEVELOPMENT ECONOMICS
DISTRIBUTION OF WEALTH
ECONOMIC CONSTRAINTS
ECONOMIC DEVELOPMENT
ECONOMIC GROWTH
ELASTICITY
ENTRY BARRIERS
EQUIPMENT
EXOGENOUS VARIABLES
EXPENDITURE
FACTOR RETURNS
FINANCIAL SUPPORT
FIRST YEAR
FIXED COSTS
GDP
GDP PER CAPITA
GROWTH THEORY
HOUSEHOLD WEALTH
INCOME DISTRIBUTION
INCOME LEVELS
INFORMAL CREDIT
INSTRUMENT
INTEREST PAYMENTS
INVENTORY
INVESTING
INVESTMENT BEHAVIOR
LABOR MARKETS
LEVEL OF CAPITAL
LIQUIDITY
LIQUIDITY CONSTRAINTS
MACROECONOMICS
MARGINAL RATE OF RETURN
MARGINAL RETURN TO CAPITAL
MARKET CONSTRAINTS
MARKET IMPERFECTIONS
MICRO DATA
MICRO-CREDIT
MICROENTERPRISES
MONEY LENDERS
POLITICAL ECONOMY
PORTFOLIOS
PROFITABILITY
PURCHASING POWER
RATES OF RETURNS
RETURNS
RISK AVERSE
RISK AVERSION
STATIC ANALYSIS
TAX
TOTAL CAPITAL STOCK
TRADE SECTOR
TRADER
TRADING
TRUST FUND
UNIT OF CAPITAL
VALUE ADDED
WEALTH
Grimm, Michael
Kruger, Jens
Lay, Jann
Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa
geographic_facet Sub-Saharan Africa
description 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.
format Working Paper
author Grimm, Michael
Kruger, Jens
Lay, Jann
author_facet Grimm, Michael
Kruger, Jens
Lay, Jann
author_sort Grimm, Michael
title Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa
title_short Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa
title_full Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa
title_fullStr Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa
title_full_unstemmed Barriers to Entry and Returns to Capital in Informal Activities : Evidence from Sub-Saharan Africa
title_sort barriers to entry and returns to capital in informal activities : evidence from sub-saharan africa
publisher World Bank, Washington, DC
publishDate 2017
url 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
_version_ 1764463972728176640