poor economics: reluctant entrepreneurs

8/11/2019 Poor Economics: Reluctant Entrepreneurs

1/23

Reluctant

EntrepreneursChapter 9


2/23

Main Arguments

1. Poor entrepreneurs are not productivebecause they are poor.

1. Entrepreneurship is too hard.

1. Aside from providing microcredits asassistance, secure jobs should also beprovided.


3/23

Poor entrepreneurs arenot productive because

they are poor.Argument 1


4/23

Key Points of Poor

Capital

Knowledge

Patience

Dependence

Conservative


5/23

Capital

There is no such thing as 100%


6/23

Knowledge



7/23

Patience



8/23

Dependence



9/23

Conservative



10/23

There is no such thingas 100%


11/23

TRICKLE-DOWN EFFECT

Capital

DependencePatienceKnowledge

Conservative


12/23

Entrepreneurship is too

hard.Argument 2


13/23

Businesses of the Poor

The poor operate

business but its too

small.

Their businesses

are unprofitable.


14/23

Figure 1: Marginal and Averagereturn

Increasing the

amount invested

increases returns the

most when the initial

investment is small,and this increase

eventually tapers off.


15/23

Figure 2: Two technologies

OP - easy for a very

small firm to grow, butthe growth potential

tapers off quite fast

OZ - The growth of the

firm is slow but there ismuch more scope for

growing the business.


16/23

S-shaped dilemma

Invest little, make little

money, and remain toopoor to invest much

more, or invest enough

to cross the hump and

then become rich andinvest even more and

get even richer.


17/23

Small businesses remains small.

They dont have

enough money to

invest.

Growing their

business wouldrequire higher cost.

It is not worth it.


18/23

Aside from providing

microcredits as assistance,

secure jobs should also be

provided.Argument 3


19/23

The availability of secure jobs canhave a transformational effect.

Start a virtuous circle of human capital

investment, and the progression up the

employment ladder.

A stable job can, by itself, change peoples

outlook on life in decisive ways.


20/23

The poor dont see becoming an

entrepreneur as something toaspire to.

Aspiration of Parents for their

Children

GovernmentTeacher

Non-TeachingGovernment Job

Employee in aPrivate Firm


21/23

A steady and predictable income

makes it possible to commit tofuture expenditure.

If a member of a family has a steady job:

schools will accept their children more readily


22/23

A steady and predictable income

makes it possible to commit tofuture expenditure.

hospitals will give more expensive treatments

knowing they will be paid

other members of the family may be able to

make the investments in their own businesses

that are necessary to allow them to grow.


23/23

poor economics: reluctant entrepreneurs

Documents