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Self-employment in Latin America

Author

Listed:
  • Luis Rene Caceres
  • Susan Ann Caceres

    (The World Bank, USA)

Abstract

This paper investigates the determinants of self employment in a sample of six Latin American countries (El Salvador, Costa Rica, Honduras, Ecuador, Paraguay and Jamaica) by the estimation of OLS equations that express the change in the rate of self employment in terms of the rate of: unemployment, salaried employment, participation, economic growth, and remittances. The paper finds that female and male self employment have different responses to participation, unemployment, remittances and economic growth, suggesting the need for particular attention to gender. Particular importance resides in the result that male self employment increases as male unemployment increases, but it does not respond to female unemployment. As well, male self employment decreases when economic growth increases, a response that does not take place in the case of female self employment. Human development and per capita social expenditures represent "lifeguards" that prevent falling into self employment, particularly important to women, and remittances have a stronger "push" effect on women to work in self employment than men. The results indicate that self employment is a means of subsistence in response to unemployment, economic stagnation, and inequality of opportunity and, as such, it is associated with poverty. Given the evidence that poor people die at an earlier age than the non-poor, in both developed and developing countries, the paper finds associations between self employment, poverty and premature death in Latin America. The paper concludes that self employment is a manifestation of a historical framework of inequality of opportunities and low taxation, which gives rise to persistent poverty trap. Low taxation results from income inequality and of the "capture" of government by the high income strata. This is a situation where tax increases are blocked and, in consequence, the public sector does not have sufficient revenues to strengthen equality of opportunity. The results contradict the argument that low taxation is conducive to the creation of jobs; instead, the results demostrate that the lack of sufficient tax revenues have incidence upon the expansion of the informal economy, poverty, and premature death. Low taxation relative to social needs violates the rights to live and work as contained in the Universal Declaration of Human Rights.

Suggested Citation

  • Luis Rene Caceres & Susan Ann Caceres, 2017. "Self-employment in Latin America," Journal of Developing Areas, Tennessee State University, College of Business, vol. 51(3), pages 33-49, July-Sept.
  • Handle: RePEc:jda:journl:vol.51:year:2017:issue3:pp:33-49
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    File URL: https://muse.jhu.edu/article/662339
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    Cited by:

    1. Valentina Rivera & Francisca Castro, 2021. "Between Social Protests and a Global Pandemic: Working Transitions under the Economic Effects of COVID-19," Social Sciences, MDPI, vol. 10(4), pages 1-21, April.
    2. Berniell, Inés & Berniell, Lucila & de la Mata, Dolores & Edo, María & Marchionni, Mariana, 2023. "Motherhood and flexible jobs: Evidence from Latin American countries," World Development, Elsevier, vol. 167(C).
    3. Carrington, Sarah J. & Herrero Olarte, Susana & Urbina, Gabriel, 2023. "Commodity cycle management in Latin America: The importance of resilience in face of vulnerability," Resources Policy, Elsevier, vol. 81(C).
    4. Oscar de Jesús Gálvez-Soriano & Miguel Ramírez-Loyola & Dixia Vega Valdivia, 2022. "Informalidad, pobreza y consumo en México: Evidencia empírica entre 1993 y 2019," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 17(2), pages 1-20, Abril - J.

    More about this item

    Keywords

    human development; labor market segmentation; equality of opportunities; gender;
    All these keywords.

    JEL classification:

    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
    • J16 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Gender; Non-labor Discrimination
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J46 - Labor and Demographic Economics - - Particular Labor Markets - - - Informal Labor Market

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