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Is the vast army of the self-employed in low income countries a source of employment generation? This paper uses data from surveys in Sri Lanka to compare the characteristics of own account workers (non-employers) with wage workers and with owners of larger firms. The authors use a rich set of measures of background, ability, and attitudes, including lottery experiments measuring risk attitudes. Consistent with the International Labor Organization's views of the self employed (represented by Tokman), the analysis finds that two-thirds to three-quarters of the own account workers have characteristics which are more like wage workers than larger firm owners. This suggests the majority of the own account workers are unlikely to become employers. Using a two and a half year panel of enterprises, the authors show that the minority of own account workers who are more like larger firm owners are more likely to expand by adding paid employees. The results suggest that finance is not the sole constraint to growth of microenterprises, and provides an explanation for the low rates of growth of enterprises supported by microlending.

Education --- Employment --- Employment generation --- Entry costs --- Informal sector --- Labor force --- Labor Markets --- Labor organization --- Microfinance --- Productive employment --- Self employed --- Social Protections and Labor --- Tertiary Education --- Work & Working Conditions --- Worker --- Workers

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A large share of the world's poor is self-employed. Accurate measurement of profits from microenterprises is therefore critical for studying poverty and inequality, measuring the returns to education, and evaluating the success of microfinance programs. But a myriad of problems plague the measurement of profits. The authors report on a variety of different experiments conducted to better understand the importance of some of these problems and to draw recommendations for collecting profit data. In particular, they (1) examine how far we can reconcile self-reported profits and reports of revenue minus expenses through more detailed questions; (2) examine recall errors in sales and report on the results of experiments which randomly allocated account books to firms; and (3) ask firms how much firms like theirs underreport sales in surveys like this, and have research assistants observe the firms at random times 15-16 times during a month to provide measures for comparison. The authors conclude that firms underreport revenues by about 30 percent, that account diaries have significant effects on both revenues and expenses but not on profits, and that simply asking profits provides a more accurate measure of firm profits than detailed questions on revenues and expenses.

Bank Policy --- Business Environment --- Business in Development --- Competitiveness and Competition Policy --- Debt Markets --- Developing countries --- Economic Theory and Research --- Finance and Financial Sector Development --- Financial support --- Fungible --- Living Standards --- Macroeconomics and Economic Growth --- Microenterprises --- Microfinance --- Private Sector Development --- Public Sector Development --- Returns --- Tax --- Trust Fund

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Using data from surveys of enterprises in Sri Lanka after the December 2004 tsunami, the authors undertake the first microeconomic study of the recovery of the private firms in a developing country following a major natural disaster. Disaster recovery in low-income countries is characterized by the prevalence of relief aid rather than of insurance payments; the data show this distinction has important consequences. The data indicate that aid provided directly to households correlates reasonably well with reported losses of household assets, but is uncorrelated with reported losses of business assets. Business recovery is found to be slower than commonly assumed, with disaster-affected enterprises lagging behind unaffected comparable firms more than three years after the disaster. Using data from random cash grants provided by the project, the paper shows that direct aid is more important in the recovery of enterprises operating in the retail sector than for those operating in the manufacturing and service sectors.

Banks & Banking Reform --- Debt Markets --- Employment --- Entrepreneurs --- Environment --- Expansion --- Finance and Financial Sector Development --- Financial institutions --- Firms --- Hazard Risk Management --- Loan --- Manufacturers --- Microenterprises --- Microfinance --- Microfinance organizations --- Microfinance practitioners --- Natural Disasters --- Scale enterprises --- Small business --- Small businesses --- Small firms --- Small scale enterprise --- Small scale enterprises --- SME --- Supplier --- Suppliers --- Urban Development

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The authors conduct a randomized experiment among women in urban Sri Lanka to measure the impact of the most commonly used business training course in developing countries, the Start-and-Improve Your Business program. They work with two representative groups of women: a random sample of women operating subsistence enterprises and a random sample of women who are out of the labor force but interested in starting a business. They track the impacts of two treatments - training only and training plus a cash grant - over two years with four follow-up surveys and find that the short and medium-term impacts differ. For women already in business, training alone leads to some changes in business practices but has no impact on business profits, sales or capital stock. In contrast, the combination of training and a grant leads to large and significant improvements in business profitability in the first eight months, but this impact dissipates in the second year. For women interested in starting enterprises, business training speeds up entry but leads to no increase in net business ownership by the final survey round. Both profitability and business practices of the new entrants are increased by training, suggesting training may be more effective for new owners than for existing businesses. The study also finds that the two treatments have selection effects, leading to entrants being less analytically skilled and poorer.

Access & Equity in Basic Education --- Business Environment --- Business in Development --- Business start-up --- Business training --- Competitiveness and Competition Policy --- Female self-employment --- Finance and Financial Sector Development --- Primary Education --- Private Sector Development --- Randomized experiment --- Trajectory of treatment effects