1. Economic Change in Ghana, 1987-2006 Chris Udry Yale University

2. Goal: document trends in entrepreneurship and employment in preparation for Ghana panel survey and associated interventions Ghana LSMS 1987 through GLSS 2006; 5 rounds of comparable cross-sections 4,000 – 7,000 households

3. Trends in Ghana

4. Significant growth over 2 decades Marked decline in poverty – Dramatic increases in education – Urbanization – Health improvements, decline in birth rates What changes do we see in economic activity at the micro level? – New enterprises? – Enterprise growth? – Increased specialization?

5. Gradual Change in Primary Occupation

6. Gradual fall in Self-employment

7. Look at Investment patterns: Household Asset Portfolios, 1992

8. Declining share of business assets

9. For business owners, as well

10. Enterprise size over time MeansMedians year# of workers# of hh workers# of workers# of hh workers 19871.671.3711 19881.771.3311 19921.641.2711 19981.651.1511 20061.741.3411 Enterprises are not growing By household, total enterprise employment MeansMedians year# of workers# of hh workers# of workers# of hh workers 19872.171.7821 19882.321.7521 19922.031.5711 19982.041.4211 20062.181.6811

11. Nor are they growing in terms of capital: Median kMeanMedian wealth 1987-88143787722 20061286701003

12. Evidence on Returns to Capital Farm profits in new technology Prices Enterprise profits

14. Prices of durable goods Prices of goods with varying life expectancies contain information on the discount rate

15. Can estimate this with data on prices and t (assuming measurement error in t) – used parts example Using this relationship, we estimate r=60%

16. NFEs earn high returns, particularly at low levels of K. - warning: sensitive to assumptions on w

17. GLSS 5 Return on Assets by Enterprise Capital Decile of Invested CapitalMedian Profit/K ^ 100 1282 2138 376 462 529 631 728 825 915 1020 n= 1707

18. Are business starts dependent on wealth?

21. Are commercial enterprises growing less, or not being started, due to capital constraints and risk? Experimental intervention associated with EGC surveys discussed earlier Driven by theory: role of risk and imperfect access to K on investment choice. Goal is to quantify effects of risk/risk aversion and capital market imperfections on investment choice

22. Not a policy evaluation; insurance is to be free Working with MIA to design an insurance product to address most salient dimension of risk of commercialization. Crop price or rainfall, likely rainfall for intensive maize. 2 x 2 design with grant experiment Sample of 500 farmers in high potential maize areas

23. Combine with data collection on expectations, and prospective uses of additional funds Simultaneous orthogonal evaluation of large- scale commercial training program for farmers

24. Annual Hours Worked

25. Labor Force Participation by Gender

26. Net effect, increase in work/capita

27. Determinants of Annual Hours Worked -- GLSS rounds 1,2,3, 5 variableestimatevariableestimate noschool18.05dist to road-0.0997 (30.83)(1.979) primary66.95months road passible0.627 (35.23)(3.256) jss105.3bank distance-1.890 (29.81)(0.578) sec88.71post distance1.003 (39.49)(0.668) male = 1367.7daily market in community-24.57 (17.26)(23.89) age48.05any market in community11.01 (2.027)(18.65) age squared-0.527restaurant in community67.08 (0.0232)(20.21) urban346.2y1987-370.3 (19.26)(21.73) electricty6.669y1988-541.2 (27.88)(22.30) pipe or borehole water-72.91y199261.94 (24.15)(19.76) Male*electricity-27.32Constant550.9 (35.78)(55.59) Male*water-11.72 (34.97) Observations25880 R-squared0.140

28. No increase in specialization: