Self-employment in the era of the new economic model in Latin America: A case study from Nicaragua

Using data from the 1993 and 1998 Nicaraguan Living Standards Measurement Survey, this paper analyses the desirability of self-employment for Nicaraguan men and women over two points in time in a changing economic environment characterized by market-based reforms called the New Economic Model. Switching regressions of the self-employed and waged and salaried sectoral choice suggest that experience is the major determinant of self-employment for both Nicaraguan men and women. Mixed findings are reported for sectoral selection suggesting that the self-employed men, depending upon current economic conditions, may alternate back and forth between the sector (self-employment or waged and salaried employment) with the highest returns. For women, improvement in economic conditions reflected negative selection in both sectors suggesting that much of the economic gains in the 1990s accrued to men.