The study aims to examine the non-linear relationship between self-employment and economic growth (growth) in the context of developing countries.
Data from a sample of 83 developing countries covering a period 2002–2015 is used. The empirical analysis is based on the dynamic panel data estimation, and the results are estimated using the two-step system GMM technique. Non-linearity between self-employment and growth is validated using Sasabuchi (1980) and Lind and Mehlum (2010) (SLM) test.
The empirical analysis suggests a non-linear and a U-shaped relationship between self-employment and growth, confirmed by the SLM test. The threshold levels for total self-employment, female self-employment and male self-employment are 57.49%, 58.86 and 55.81%. The findings are also robust to alternate estimation technique and alternate measure of the dependent variable.
Policy implications of the findings include the need for policies that foster and channel self-employment properly as the higher level of self-employment is found to benefit growth.
This study is the first attempt to examine the empirical relationship between self-employment and growth. As such, it makes a novel contribution to the extant literature on the relationship between the two variables.
I thank the anonymous reviewers for reviewing the manuscript and providing constructive and insightful feedback to improve the quality of the manuscript.Data availability statement: The data that support the findings of this study are available from the corresponding author upon reasonable request.
Yerrabati, S. (2021), "Self-employment and economic growth in developing countries: is more self-employment better?", Journal of Economic Studies, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JES-08-2020-0419
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