The macroeconomic consequences of subsistence self-employment

We evaluate the aggregate effects of expansions credit supply in environments where subsistence self-employment is prevalent. extend a standard macro development model to include unemployment risk, which becomes key driver selection into self-employment. The consistent with joint distribution earnings and occupations, reaction wages labor demand shocks, small microloans on self-employed. find that elasticity output proportional individual earnings. This proportionality arises due muted general equilibrium presence self-employment, not present models without larger wage response, crowding-out private savings response higher availability credit.