Non-Farm Enterprises in Rural Africa: New Empirical Evidence

52 Pages Posted: 20 Apr 2016 Last revised: 21 May 2020

See all articles by Paula Nagler

Paula Nagler

Maastricht University

Wim Naudé

RWTH Aachen University; IZA Institute of Labor Economics; ASC University of Leiden; University of Johannesburg

Paula Nagler

Erasmus University Rotterdam (EUR); IZA Institute of Labor Economics

Wim Naude

affiliation not provided to SSRN

Date Written: October 1, 2014

Abstract

Although non-farm enterprises are ubiquitous in rural Sub-Saharan Africa, little is yet known about them. The motivation for households to operate enterprises, how productive they are, and why they exit the market are neglected questions. Drawing on the Living Standards Measurement Study -- Integrated Surveys on Agriculture and using discrete choice, selection model and panel data estimators, this paper provide answers using data from Ethiopia, Niger, Nigeria, Malawi, Tanzania, and Uganda. The necessity to cope following shocks, seasonality in agriculture, and household size can push rural households into operating a non-farm enterprise. Households are also pulled into entrepreneurship to exploit opportunities. Access to credit and markets, household wealth, and the education and age of the household head are positively associated with the likelihood of operating an enterprise. The characteristics are also associated with the type of business activity a household operates. Rural and female-headed enterprises and enterprises with young enterprise owners are less productive than urban and male-owned enterprises and enterprises with older owners. Shocks have a negative association with enterprise operation and productivity and a large share of rural enterprises does not operate continuously over a year. Enterprises cease operations because of low profits, a lack of finance, or the effects of idiosyncratic shocks. Overall the findings are indicative that rural enterprises are "small businesses in a big continent" where large distances, rural isolation, low population density, and farming risks limit productivity and growth.

Keywords: Private Sector Economics, Private Sector Development Law, Marketing, Labor Markets, Educational Sciences, Employment and Unemployment

Suggested Citation

Nagler, Paula and Naudé, Wim and Nagler, Paula and Naude, Wim, Non-Farm Enterprises in Rural Africa: New Empirical Evidence (October 1, 2014). World Bank Policy Research Working Paper No. 7066, Available at SSRN: https://ssrn.com/abstract=2513122

Paula Nagler (Contact Author)

Maastricht University ( email )

Wim Naudé

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

ASC University of Leiden ( email )

Netherlands

University of Johannesburg ( email )

South Africa

Paula Nagler

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Wim Naude

affiliation not provided to SSRN

No Address Available

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