How vulnerable are the self-employed? Evidence from Uganda
Due to small firm sizes and inter-linkages between household and business finances, small-scale entrepreneurs in developing countries are inherently vulnerable to temporary and per-manent income shortfalls, and hence household poverty. While the ILO generally defines self-employment without employees as vulnerable employment, little empirical research has beendone on the extent to which the self-employed are indeed vulnerable. This paper makes twomain contributions: first, it operationalises the concept of vulnerability in the context of self-employment in developing countries by defining vulnerability as the risk of having businessincome below a living wage threshold. Secondly, it investigates the extent and correlates ofvulnerability. Using a balanced entrepreneur panel dataset from Kampala, Uganda, it is shownthat the self-employed are heterogeneous with respect to vulnerability and observed earnings:while close to 70% of the sample are vulnerable and mostly earn incomes below the threshold,about 30% are non-vulnerable and mostly earn incomes above the living wage. Vulnerable en-trepreneurs are shown to be significantly different from non-vulnerable entrepreneurs in severaldimensions, including those that do not directly predict income.