3.1. Data
Our data comes from a large representative sample survey of microenterprises and a census of small businesses in the 10 largest cities in Ethiopia – Addis Ababa, Mekelle, Bahir Dar, Dire Dawa, Adama, Dessie, Gonder, Hawassa and Jigjiga. Since Addis Ababa is a big city with a high concentration of MSE, the 10 sub cities within Addis Ababa are considered as 10 separate strata, using a sampling weight drawn from the population distribution to assign the sample size for each of the 10 sub cities in the city. From each sub city, a simple random sampling technique was used to draw the sample of micro enterprises. The population frame for these enterprises in Addis Ababa is created by combining three separate administrative lists compiled by the Bureau of Labor and Social Affairs, the Addis Ababa Trade and Industry Bureau and the Addis Ababa Urban Job Creation and Food Security Agency (formerly the Addis Ababa Micro and Small Enterprise Development Agency). As shown in Table 1, our final sampling frame for Addis Ababa constitutes a total of 16004 micro and small manufacturing enterprises. From this, 3298 of them were small while the remaining 12706 were microenterprises. While we conducted census for the small enterprises, we sampled 1195 micro enterprises from the 10 sub-cities of Addis Ababa using stratified random sampling technique.
Table 1
Sampling Distribution of MSEs in Addis Ababa
Sub cities
|
Population
|
Surveyed
|
Small
|
Micro
|
Small (census)
|
Micro (sample)
|
Addis Ketema
|
373
|
1090
|
373
|
141
|
Akaki Kaliti
|
406
|
1177
|
406
|
86
|
Arada
|
229
|
739
|
229
|
58
|
Bole
|
361
|
1791
|
361
|
162
|
Gulele
|
298
|
1144
|
298
|
100
|
Kirkos
|
191
|
840
|
191
|
76
|
Kolfie
|
229
|
2426
|
229
|
247
|
Lideta
|
125
|
520
|
125
|
59
|
Nifas Silk
|
738
|
1626
|
738
|
121
|
Yeka
|
348
|
1353
|
348
|
145
|
All
|
3298
|
12706
|
3298
|
1195
|
Source: ESBDE Baseline Survey, 2017 |
The frame used for the nine regional cities was also based on largely a similar approach with that of Addis Ababa. The only exception was that there was no administrative data at the regional bureaus of Labor and Social Affairs and thus the sampling frame was constructed using the Regional Micro and Small Enterprise Development Agencies (ReMSEDA) and the trade and industry bureau of each region. We used cities to stratify the sample and the sample size in each city was determined using the population distribution of these enterprises as a sampling weight. As indicated in Table 2, we conducted a census of the small firms (total 1566) and survey of a randomly selected 2115 micro enterprise firms in the nine regional cities.
Table 2
Sampling distribution of MSEs in the Nine Major Regional Cities
Cities
|
Population
|
Surveyed
|
Small
|
Micro
|
Small (census)
|
Micro (sample)
|
Adama
|
121
|
531
|
121
|
140
|
Bahir Dar
|
252
|
948
|
252
|
314
|
Dessie
|
89
|
384
|
89
|
147
|
Dire Dawa
|
126
|
447
|
126
|
118
|
Gondar
|
126
|
737
|
126
|
211
|
Hawassa
|
316
|
806
|
316
|
143
|
Jigjiga
|
60
|
120
|
60
|
44
|
Jimma
|
146
|
480
|
146
|
148
|
Mekele
|
330
|
2449
|
330
|
850
|
All
|
1,566
|
6902
|
1,566
|
2,115
|
Source: ESBDE Baseline Survey, 2017 |
We then conducted face-to-face interviews from December 2016 to June 2017 by implementing a survey instrument that contains a rich set of questions on demographic characteristic of the entrepreneur, business profile, credit history, saving culture, number of workers, capital stock, cognitive ability, risk and time preference. The survey instrument was designed in an electronic version (CSPro) to collect the data using a Computer-Assisted Personal Interview (CAPI) system. The CAPI technology helped us produce better quality data by minimizing coding and manual errors and shorted the data collection time.
3.2. Empirical strategy
The existing body of literature explains job quality as a function of two groups of determinants: socio-economic characteristics of workers and characteristics of firms (Crespo, Simoes, & Pinto, 2017; Green, 2006; Hauff & Kirchner, 2014). In this paper, we are more interested in studying what entrepreneurial and enterprise characteristics and attributes contribute to quality job creation. In other words, we aim to examine how and in what ways firms that create productive jobs differ in their characteristics and attributes from those that create less quality jobs. We measure job quality by a set of variables: (i) average pay, (ii) nature of employment contract firms enter with their workers, and (iii) physical working conditions. We measure average pay by the average wage enterprises pay for their production workers. Employment contract is defined by a contract dummy variable which is 1 if the enterprises offer written contracts to their workers and 0 otherwise. We can alternatively define it by either the proportion of workers that gets offered written contracts or the proportion of permanent employees in a given enterprise. On the other hand, we define and measure physical working conditions by a set of health and occupational safety variables: (a) a dummy variable called PPCE, which is equal to 1 if the enterprise provides its workers with all the necessary personal protective clothing and equipment and 0 otherwise; (b) a dummy variable called occupational safety training, which is equal to 1 if the enterprise effectively trains its workers on occupational safety issues and 0 otherwise; (c) number of work-related accidents in the enterprise.
Based on hypothesis 1, MSE enterprises that create productive (quality) jobs tend to be operated by educated and experienced entrepreneurs. To capture the effects of education, we use three indicators: (a) years of schooling, measured by the total number of years of schooling of the entrepreneur; (b) vocational training, a dummy variable equal to 1 if the entrepreneur attended vocational school and 0 otherwise; and (c) international language proficiency, which is measured a dummy variable equal to 1 if the entrepreneur speaks English well and 0 otherwise. It is assumed that for an owner/manager who aspires to grow and interact with global customers, speaking English constitutes part of his human capital aspect. On the other hand, managerial experience is captured by years of operation or number of years of business ownership by the entrepreneur.
Likewise, based on hypothesis 2, we assert that larger enterprises tend to create better quality jobs. Enterprise size is measured by number of workers, and enters the regression as dummy variable, where we have three size categories: Micro (1 to 5 employees), small (6 to 30 employees) and medium (more than 30 employees).
So to test our hypotheses, we regress the dependent variables (i) to (iii) on entrepreneur and enterprise characteristics, such as education, management experience and other exogenous variables. If we denote the dependent variables as Yi with subscript i indicating enterprises, and Xi as explanatory variables, the regression equation can be written as:
Where \({\alpha }_{i}\) is a vector of parameters to be estimated and \({\epsilon }_{i}\) is an error term.
While the wage and number of work-related accidents equations are estimated using OLS method, the equations explaining the proportion of workers with written contract and/or the proportion of permanent workers in an enterprise are estimated with the two limit Tobit estimator because the data on these variables are censored at 0 and 1 (Long, 1997). On the other hand, the categorical dependent variables (i.e., contract dummy, occupational safety training, and PPCE dummies) are estimates using the logistic regression method.
Below we discuss the two potential categories of determinants of job quality: entrepreneur and firm characteristics.
(i) Entrepreneur related characteristics
Age: age is associated with experience, especially non-managerial (Mumford & Smith, 2004); and experience forms part of human capital of the owner (Becker, 1962). The link with job quality is that MSE enterprises creating productive jobs tend to be operated by experienced owners.
Gender: evidence show that men and women have different risk attitudes and such attitudes tend to be reflected in their decisions and actions (Stier & Yaish, 2014). Following these differences in risk aversions between men and women, several studies found evidence of variations in relation to working conditions where men tend to focus on creating competitive environments and paying higher wages and women tend to create better working conditions and pay lower wages (Stier & Yaish, 2014; Levanon, England, & Allison, 2009). The gender-related issue may also be associated with time-use and effort dilution of female entrepreneurs as they often have to juggle between the business and household. Further, social attitude and norms put further strain on female operated businesses.
Education: ever since the seminal work of Becker (1962), the role of education has been widely researched. In relation to job quality, we hypothesize that better educated entrepreneurs tend to create better quality jobs. MSEs with highly educated entrepreneurs tend to produce more expensive products. And expensive products tend to have better qualities. Highly educated and experienced workers are more likely to produce better quality products. And enterprises that offer better quality jobs are highly likely to attract better skilled and experienced people.
Employment experience in the formal sector: whether the owner was self-employed from the beginning or s/he has worked as a wage-earner in the formal sector has implications on the owner’s views and behavior towards workers and working conditions. His experience as a wage-earner may help the owner to better connect with workers and this might contribute towards improving the productivity of employment in the form of better relations and workers participation, for example, which are considered as dimensions of job quality.
Self-employment experience – whether an entrepreneur has a long spell of experience of self-employment is a strong indicator of business ownership and management experience. The advantages of self-employment would arise from the direct exposure, hands-on managerial practice and learning by doing effects, which cumulatively build the managerial capacity of entrepreneurs.
(ii) Firm characteristics
Ownership form
the current form of ownership of the firm is considered as a potential determinant of job quality. Different forms of ownership vary in terms of wage and other working conditions. For example, cooperatives tend to perform less than non-cooperatives. This is so because the former tends to suffer from organizational and managerial problems ( (Assefa, Zerfu, & Tekle, 2014).
Firm size
firm size is another important determinant of job quality. There is considerable literature on the positive relationship between firm size and job quality (Brown & Medoff, 1989; Oi & Idson, 1999). Contract administration has administrative costs. The average contract administration cost tends to be lower for larger firms. Consequently it is relatively easier for larger firms to offer written contracts.