Effectivity of micro-scale businesses in alleviating poverty in Philippine households within specific income groups
Date
2014-12
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Abstract
This paper examines whether or not micro-scale businesses (MSB) help alleviate poverty amongst all income quintile groups of poor households or is there a select income quintile that is better able to gain more from MSB. This was tested using the 2013 Annual Poverty Indicators Survey (APIS) data. In order to address endogeneity problems, namely that of self-selection, our
model is estimated in two stages: the first stage estimates a model of determinants of MSB and the second stage estimates the effect of MSB on expenditures. The results of the first stage
estimation show that the determinants of MSB are variables attributed to the owner's motivation, owner's education level, sources of capital formation, as well as the different taxes and permits set by the government. By using the predicted values on the second stage, results show that engaging in MSB decreases per capita expenditure. But the interaction term between predicted MSB and income quintiles show that households from the third quintile gain the most when they engage in MSB as compared to that of the highest income quintile. All income quintiles have a positive significant effect to per capita expenditure. As such, the authors establish that MSB is most effective when implemented amongst those of the middle class. Should further studies be done, exhausting all possible determinants of MSB as well as per capita expenditure should be considered; also consider other methods and models to account for self-selection and testing efficiency.
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Keywords
Micro-scale business, Poverty, Household