Self-Employment Within the Firm
We study the internal organization of manufacturing firms in Uganda. We measure what people do within firms and find limited specialization, far below what is feasible given the prevailing production process and average firm size of 5.7 workers. We build and estimate an occupational choice model in which firm size, productivity, and specialization arise endogenously. The model shows that firms in this setting are largely “self-employment in disguise” and generate just a 20% productivity gain over literal self-employment. In a counterfactual economy with full specialization, the same aggregate output can be produced with an average firm size of only 1.6.
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