Effects of individual and household characteristics on informal entrepreneurship among youths in Senegal

This paper investigates the determinants of entrepreneurship among young people aged between 15 and 35 years in the informal sector in Senegal. The latter contributes to around 50% of GDP and harbors around 90% of businesses and 90% of total employment in the country. A probabilistic model is used to estimate the effects of individual and household characteristics on young people’s choice to engage in informal entrepreneurship. The data at hand come from the Survey on Youth Transition in Senegal, better known as the DEMTREND Survey (World Bank, 2015). The survey collected information on education, employment, entrepreneurship, and risk preference, in addition to other characteristics related to individuals. The results reveal that young people with primary or secondary levels of education and those who have attended only Quranic school are more likely to become entrepreneurs in the informal sector than their peers, probably because of their inability to land formal jobs. In addition, risk lovers are more likely to be informal entrepreneurs than risk-averse individuals. Moreover, in addition to laying out that family characteristics matter, the results show that the position of an individual’s household in terms of wealth distribution has a significant influence on their likelihood of engaging in informal entrepreneurship. The results are robust to the use of different types of models, such as the Tobit model.