Is self-employment an antidote to poverty in developing countries? Insights from a cross-sectional study in Ghana

Abstract

Despite numerous policies implemented in this respect, Ghana still needs to catch up in achieving the Sustainable Development Goal of ending poverty in all forms by 2030. One way to escape poverty for most people is access to a steady flow of sufficient income from employment. However, with limited paid employment opportunities in Ghana, as is the case for other developing countries, the question of engagement in self-employment as a means to escape poverty emerges. This study conducts a thorough empirical analysis to gauge if self-employment could be an effective tool for addressing poverty in Ghana and the types of self-employment that possess the potential as an antidote to poverty in Ghana. The study thus examines the effects of self-employment on poverty and the type(s) of self-employment that is worth pursuing using nationwide cross-sectional survey data. The study with the aid of a linear probability model finds that self-employment has a significant positive relationship with poverty. Self-employed persons are more likely to be poor relative to persons in paid employment. However, non-agriculture self-employment and opportunity entrepreneurs is a viable route out of poverty even for persons with less than desired levels of education and skills. The implications for poverty reduction are discussed.