household. The regression explains relative movements in consumption by changes in income sources, while also controlling for change in household size (which would directly impact consumption per capita). The model implicitly controls for time invariant aspects of the household and community, and the separate impact on consumption ranking coming from changes in each type of income source. Separate regressions are done for all HEs and HEs reported as primary or secondary, in urban/rural areas, across consumption terciles in 2003, and across education level of head in 2003. The separate regressions are done to capture the total impact for all HEs, and for households that consider HEs their primary or secondary occupation separately. We run the regression across location, consumption levels and education level of head of household to see if any of these types of households are disproportionally able or unable to increase their relative consumption.

The first difference regression shows that successfully opening an HE is related to substantial upward mobility (column 1). This is true at the national level (7.3 percentiles higher relative consumption), but this is particular driven by rural households and households with low education. Households from all consumption terciles seem able to utilize HE for upward mobility. HE start-ups are not the average effect of a start-up, however. The observed start-up effects exclude those households that tried and failed over the five year period between surveys. Twenty-five percent of HEs were less than one year old in 2008/9, so we can expect that many HE start-ups and closures are not included in the observed effect over five years. Further, the data do not allow a disaggregation by age of enterprise; hence HE start-ups could have been operational between 1 day and just over 5 years and it is not possible to look at growth in consumption as a function of time and age of enterprise.

As discussed earlier the distinction between HEs as primary and secondary employment in the NPS panel could be mostly a reflection of the success of the enterprise. Households that start-up a new HE and consider it their primary employment on average moved up 18 percentiles. Again the improvement in relative wealth was more pronounced for rural households that on average moved up 23 percentiles, compared to urban households that moved up upward 10 percentiles. The substantial upward mobility for primary employment HEs is found in all terciles. Secondary employment HEs on the other hand are not related to upward mobility. The pattern confirms that successful HEs are more likely to be reported as primary employment, with less successful ones being reported as secondary employment. Further indication of the presence of a reporting bias is found among the 20 percent of households with a secondary HE in 2003 that “upgraded” to a primary HE in 2008. These “up-graders” on average moved up 33 percentiles. Though based on few observations this indicates that even though starting an HE as a secondary activity by itself is not associated with upward mobility, it can be a stepping stone to success and upward mobility if the enterprise becomes successful enough to be considered as a primary activity for the owner.

Losing HE employment (primary or secondary) was not significantly related to a change in relative consumption except for those who started in the middle tercile. Most households (55%) just closed their enterprise without any other changes to the income portfolio, so it’s not because they found a better income source. Presumably, HEs that were closed were not doing well, so the lack of significance here might be expected. The very low level of investment made in most HEs could also be a reason why a negative effect from closure is not observed.

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