Title: Entrepreneurship as the safe option: Evidence from India
Discussant: Maurizio Bussolo
We conducted the 21st Consumer Pyramids Research Seminar on August 18th 2022 at 7 PM IST.
Geoffrey Borchhardt from Yale University and Olav Sorenson from University of California, Los Angeles presented their work on returns to entrepreneurship in India. The event was attended by over 60 participants. The audience contributed around 20 questions and comments.
The majority of literature on returns to entrepreneurship is focused on high-income western countries. A resulting prevalent assumption is that self-employment is an option with greater risk and lower returns, as compared to stable paid employment. This study sheds light on the returns to entrepreneurship in the context of India, where many do not have stable employment as an option. The authors identify three broad categories of entrepreneurs in India. The first are the ‘growth entrepreneurs’, who run businesses with employees. The second are agricultural entrepreneurs, and the third are those engaged in informal self-employment or micro-enterprises. The study uses coarsened exact matching on gender, age, education, survey wave, region, religion, and caste to examine returns across the three categories of entrepreneurs.
The authors observe that on average, entrepreneurs earn more than employees across all subgroups except the most highly educated. Returns to entrepreneurship were found to be largest at the bottom of the income distribution. They attribute this to entrepreneurs in India having more stable income streams and fewer months with no income.
Maurizio Bussolo from World Bank served as discussant for the paper. Bussolo appreciated the creative use of CPHS data in this study. He placed the research in the larger context of the literature and debate around informality in developing countries. He highlighted potential issues in the definition of self-employment and the measurement of temporal variables in the study. The effect of varied levels of employment options across rural and urban regions on the matching method used in the study was brought forward. He also provided suggestions on delving deeper into policy implications, citing World Bank data on informality in South Asian countries.
The session concluded with a discussion on extending the research to include perspectives from development economics and literature on informality in developing countries. All questions and comments from the enthusiastic audience were answered by Olav Sorenson throughout the presentation.