Understanding self-employment in Brazil: Can people afford to search for jobs? (VoxDev)
Aug. 2025
by Thiago Scarelli and David N. Margolis
Three striking regularities stand out when comparing labour markets across the world:
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The self-employed make up a large share of the workforce in poor countries; while wage workers dominate in rich ones (Bandiera et al. 2022, Gindling and Newhouse 2014).
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People who are working by themselves in developing countries are systematically more likely to be among the poorest of all workers (Scarelli 2022).
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Self-employed workers in developing countries are also much more likely to be informal, which means they tend to lack the social protection extended to formal workers (Ulyssea et al. 2025).
Taken together, these patterns suggest that understanding global poverty and vulnerability means, to a large extent, understanding self-employment.
This is no easy task. Self-employment is a broad classification comprising numerous activities, ranging from successful entrepreneurs to individuals working for themselves ‘by necessity’ (Margolis 2014). Still, ‘necessity’ is rarely given a sharp economic definition and can therefore be difficult to quantify. Without a clear distinction between entrepreneurs of necessity versus opportunity, it is difficult to determine whether a large contingent of self-employment is, by itself, something that should worry policymakers.
This is the key motivation behind our recent work (Scarelli and Margolis 2025), in which we suggest that ‘necessity’ self-employment arises when households, facing material scarcity and financial constraints, are driven to prioritise immediate consumption that cannot be met through alternative means. This can occur even when well-paying wage jobs are available but take too long to find, as is often the case in urban centres in developing countries.