Employment Dynamics and determinants of Transition from Solo Self-Employment to Employer status

Abstract

The labour markets of many developing countries, particularly Tanzania, are dominated by small businesses that are typically owned and operated by a single family member. Evidence suggests that these individual owned businesses make a slow transition from solo self-employment to employer status. There is little understanding of the mechanisms behind this low transition, particularly in the context of Tanzania. Using panel data, a Markov transition framework is employed to model movements between employment states. A logit regression model is then applied to estimate the determinants of transitioning from self-employment in period  to employer status in period . The findings reveal that the extent of transition between labor market status is small while owner characteristics, environmental and business-related factors, play a significant role in explaining the transition across labour market status. According to the study, policies promoting balanced regional development, enterprise market experience, education, microcredit accessibility, and business information access are critical in accelerating the transition of solo elf employment to employer status.